SWIFT considered ‘neutral’ on sanctions; debate sparked on whether Ethereum is the same

Coin Center Research Director Peter Van Valkenberg raised an interesting point on Monday when he tweeted a screenshot of the SWIFT website showing details of the entity. role in sanctions enacted by a “national authority”.

Comments on the tweet quickly compared this information to Ethereum’s role in transaction processing.

Send a Tweet. pic.twitter.com/82IRrRLbDR

— Peter Van Valkenburgh (@valkenburgh) August 22, 2022

SWIFT is a global payment messaging service that allows banks to communicate with each other regarding financial transactions. According to February 2022, SWIFT processes transactions between “4 billion accounts and 11,000 institutions in over 200 countries.”

Van Valkenburgh’s tweet states that SWIFT “does not monitor or control the messages users send through the system.” Furthermore, he stated that

“All decisions regarding the legitimacy of financial transactions under applicable regulations, such as sanctions regulations, rest with the financial institutions that deal with them…As far as financial sanctions are concerned, SWIFT’s focus is on fulfilling our users’ responsibilities to comply. to assist in complying with national and international regulations.

The rest of SWIFT’s website explains that “SWIFT is a messaging service provider only and does not participate in or control the underlying financial transactions.”

Interestingly, in response to the question “Will SWIFT banish banks?”, the answer is “SWIFT is neutral.” However, it has confirmed that it has “disconnected all designated Russian entities” in accordance with EU regulations in 2022.

Comparison with Ethereum Sanctions

The Ethereum network has come under scrutiny over the past week following US sanctions against Tornado Cash, an application running on top of the protocol.

ethereum handle transaction Between 674,265 entities daily, nodes are running from over 64 countries.

Projects such as Circle’s $USDC, Aave, Uniswap, and Balancer have complied with US sanctions by blacklisting addresses or removing access to the front-end GUI for users who manipulated Tornado Cash. .

However, it was revealed last weekend that Ethereum, Ethereum’s largest mining pool, was not processing blocks containing Tornado Cash transactions. While this is within the rights of any validator (PoW or PoS), it is a step towards Ethereum censorship at the protocol level.

The role of a miner or validator in blockchain is to process, secure and verify transactions within the network. They are a core part of the network’s infrastructure rather than applications built on top of the protocol.

CryptoSlate reached out to Ethermine for comment, but was only able to reach out to mods in the Discord community. Mods assumed the decision was made to ensure compliance with US sanctions. However, one might argue that Ethermine does not need to undergo such drastic changes if it follows the SWIFT model.

Is Ethereum Neutral?

Should Ethereum be viewed as a neutral entity whose users are responsible for their actions with respect to authorized entities? Responsibility rests with the financial institutions that handle them.”

The argument could be further extended to argue that Tornado Cash can be considered a neutral entity as the Tornado Cash protocol itself does not launder money and the users using it make that choice. increase.

The definition of a “financial institution” within a decentralized ecosystem is unclear. One of the most important aspects of crypto regulation may revolve around confirming legal definitions of blockchain terminology. In the EU, this is already underway and could lay the groundwork for future crypto regulation.

There are other ways to launder money through privacy-first assets. In that cash is a physical asset that can be moved without a trace, built-in privacy mechanisms make it easy to use for money laundering. When criminals use cash to launder money, no sanctions are imposed on the money itself. So why were all Ethereum addresses associated with Tornado Cash authorized?

There are no easy answers to these questions. However, it is clear that old laws apply to new technologies, and technologists and legislators need to work together on this topic to ensure free and fair development of decentralized networks.