- Recent U.S. government actions target privacy tools in the crypto sector.
- A new White House report proposes anti-money laundering rules for DeFi protocols with concentrated ownership.
- Major crypto developers face legal action for involvement in privacy-focused tools.
- Industry leaders argue that privacy is essential and are supporting legal defenses for affected developers.
- DeFi community initiatives and proposals continue despite ongoing legal and regulatory challenges.
Federal authorities in the United States have increased scrutiny of cryptocurrency privacy tools, as shown by recent legal action against developers and new government reports recommending tighter controls. In the past two weeks, prosecutors convicted Roman Storm, a developer for Tornado Cash, and the creators of Samourai Wallet pleaded guilty to federal crimes related to their work on privacy technologies.
A new document from the White House, titled “Strengthening American Leadership in Digital Financial Technology”, outlines strategies to expand anti-money laundering laws, including applying the Bank Secrecy Act to decentralized finance (DeFi) projects. The report says that DeFi services could fall under these regulations if a small number of parties can control the protocol through governance tokens.
A federal prosecutor in the Tornado Cash case stated, “Isn’t Anonymity just another word for concealment?” In court, the government maintained that privacy features can help criminals hide assets. However, defense attorneys and privacy advocates argue that not having financial privacy poses risks for ordinary people. One attorney asked, “How would you feel if someone took your bank account and published it on the internet?”.
Leaders in the crypto community, such as Ethereum co-founder Vitalik Buterin, are calling for privacy to become a standard feature in digital wallets. On the Bankless podcast, Buterin said, “We should not have privacy wallets — privacy should be a feature of wallets.” The Ethereum Foundation has started working toward this goal and pledged $500,000 to help with Storm’s legal costs.
Industry voices continue to press lawmakers to protect user privacy in upcoming regulations. Josh Swihart, CEO of Electric Coin Company, said in a letter to senators that financial privacy is necessary to prevent surveillance and discrimination, stating, “Treating all privacy-oriented digital assets as suspect would be akin to banning locks because criminals might hide behind closed doors.”
Meanwhile, the DeFi sector remains active. The Uniswap DAO is considering forming a company in Wyoming, while the Lido DAO is exploring a token buyback plan and Polygon DAO may increase its minimum stake requirements for validators. In one scenario, funds seized from the Samourai Wallet case might become the first official deposit in a planned U.S. Strategic Bitcoin Reserve, in line with a proposal from Donald Trump’s team.
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