Tornado Cash sequel, Privacy Pools, aims to please US regulators


Fin is a former junior editor at TechForge.

An ex-developer of Tornado Cash, the sanctioned crypto mixer that makes crypto assets harder to track, is working on a new platform that hopes to solve the service’s ties to illicit activity.

Ameen Soleimani believes that Privacy Pools, the working name for his new Ethereum mixer launched on GitHub, will nudge US regulators to reconsider their stance on privacy mixers.

In a lengthy Twitter thread, Soleimani discussed what he says as the “critical flaw” with Tornado Cash: that regular, law-abiding users have no way of distancing themselves from criminal enterprises.

Privacy Pools plans to solve this by allowing depositors and withdrawers to opt out of an anonymity set containing an address tied to stolen or laundered assets.

It does this through zero-knowledge (ZK) proofs, ensuring the maintained privacy of the user.

“Users have the option to help regulators isolate illicit funds, without revealing their entire transaction history.”

“With privacy pools, just because someone deposits into the same smart contract as you, it doesn’t mean they can also force you into sharing an anonymity set with them. It’s your choice.”

Soleimani provided a demonstration of how Privacy Pools is used:

Although a demo version is already live, the developer says the protocol remains at an “experimental” stage as it is yet to be audited, but that it is “pretty close” to being ready.

Soleimani said he wants Privacy Pools to empower the crypto space “to defend against hackers abusing the anonymity sets of honest users without requiring blanket regulation or sacrificing on crypto ideals.”

He also said he wants blockchain analysts like Chainalysis and TRM Labs to trace back deposits so that users of the tool can avoid creating their own exclusion lists manually.

Ultimately, Soleimani wants the protocol to “start a conversation” with US regulators on the benefits of on-chain privacy tools and how they can co-exist separately from illicit activity through ZK proofs.

In August last year, the US Office of Foreign Asset Control (OFAC) sanctioned ETH and USDC addresses tied to Tornado Cash after a series of reported hacks by North Korea’s Lazarus Group.

Authorities believe it used the mixer to hide the stolen funds and maintain anonymity.

Days later, Tornado Cash’s creator, Alexey Pertsev, was arrested in the Netherlands and faces multiple money laundering charges. He will remain in custody until his next hearing in April.

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