Crypto Influencer: KYC and Permissionless Money Cannot Co-ExistAllgemein
• Recent arrests of the founders of Tornado Cash have prompted questions on whether Know Your Customer (KYC) laws and permissionless money can co-exist.
• Most micropayments made using the Lightning Network are “nearly untraceable”, while wallets set up using wallet service providers such as MetaMask do not require personal information.
• The US government crackdown on Tornado Cash is at odds with the central ethos that motivated Bitcoin’s creator/creators.
Does KYC and Permissionless Money Co-Exist?
In light of the recent arrest of the founders of Tornado Cash, a decentralized private payments protocol built on top of the Ethereum network that severs the link between sending and receiving wallets, some are questioning whether Know Your Customer (KYC) laws and permissionless money can co-exist.
The Lightning Network & MetaMask
Crypto influencer CryptoTea asked whether bitcoins lightning network help facilitate untraceable anonymous financial transactions? Does Meta Mask do KYC? What’s stopping the cops from arresting the developers of meta mask and lightning labs?, adding that it is her understanding “that KYC laws and permissionless money can NOT coexist”. According to an explainer on Kraken , most micropayments made using the Lightning Network, a layer-2 payments protocol built on top of the Bitcoin blockchain, will be “nearly untraceable”. Meanwhile, users can set up a wallet using wallet service providers such as MetaMask without submitting any personal information, as is required when setting up accounts on platforms bound by KYC requirements.
US Government Crackdown
The US government banned its citizens from interacting with Tornado Cash last year and has since been arresting its founders, claiming that they and the protocol knowingly facilitated billions worth of money laundering, including for North Korean hacking group Lazarus Group. Crypto community members have been highly critical of this crackdown, likening it to arresting someone for inventing a curtain or hammer due to someone else potentially misusing them .
Central Ethos Motivated Bitcoin Creator/Creators
The central ethos that motivated Bitcoin’s creator/creators was creating an entirely new decentralized digital currency which would be censorship-resistant, permissionless and anonymous. This vision was then expanded by innovators such as Vitalik Buterin (the creator of Ethereum).
The recent US government crackdown on Tornado Cash is at odds with cryptocurrency’s core ethos – one focused around creating a safe space for users to transact without fear or surveillance from centralized entities like governments or banks. Whether or not KYC regulations will continue to clash with these ideals remains to be seen in future years .