Many experts around the crypto space have concerns. The ban on Tornado Cash by the US could escalate issues for the broader private protocols space. The common notion emerges from the situation. Numerous entities working within the privacy sector of Web3 and their entire efforts would go into vain.
Co-founder of Manta Network, Shuno Chu, showcased his concerns about the impact of Tornado Cash ban. He thinks that every other Web3 protocol would take a hit following the sanctions on open-source protocol.
Manta Network is a layer-1 privacy protocol based on the Polkadot network. The protocol broadly facilitates the private transactions within the decentralized finance (defi). Chu has concerns that after Tornado Cash, other privacy protocols including his own protocol, could end up in the similar situation. The whole point of efforts towards privacy within Web3 space would go worthless after deploying more censorship.
Ethereum based open-source privacy protocol, Tornado Cash (TORN), makes any crypto transaction unidentified. The transaction first goes to the Ethereum blockchain, where the smart contract mixes the funds and this follows the withdrawal of funds from another address. While working in this way, the privacy protocol maintains anonymity of transactions. Other privacy protocols like Monero (XMR) and Zcash (ZEC) also resemble similar activities in terms of features and services.
However, the United States Treasury Department banned use of Tornado Cash protocol for the users within the country. Additionally, on August 5th, 2022, the authorities put 44 associated addresses belonging to Etherum (ETH) and USD Coin (USDC) on the Specially Designated Nationals (SDN) list.
Authorities accused the privacy protocol for laundering of more than 7 billion USD worth digital assets. Out of the alleged laundered funds, around 455 million USD was the funds that apparently belong to North Korea’s biggest hacking group named Lazarus Group. The instance of stealing massive amounts is said to be the biggest digital assets heist ever known.
Source: https://www.thecoinrepublic.com/2022/08/17/experts-think-tornado-cash-ban-would-impact-the-whole-privacy-protocol-sector/