Coin Center: Whether Tornado Cash Founder Violated "Money Transmission Services" Regulations Remains Doubtful

Odaily Planet Daily News Coin Center, a non-profit encryption research center, published an analysis article on the recent allegations of Tornado Cash founders Roman Storm and Roman Semenov. The article stated that the two founders were accused of conducting an illegal money transmission business. However, Coin Center believes that based on the facts of the current allegations, it is not clear whether they actually violated relevant laws. The article further explains FinCEN’s 2019 virtual currency guidelines that anonymous software providers are not money transmitters. FinCEN regulations exclude from the definition of money transmitters those who merely provide “delivery, communication, or network access services used by money transmitters to support money transmission services.” This is because suppliers of the tools (communication, hardware or software) that can be used for money transmission (such as anonymity software) are in the business of "trade" and not money transmission. Second, the guidance also states that people who utilize the software to anonymize their own transactions will be either users or money senders, depending on the purpose of each transaction. For example, users would use the software when paying for goods or services on their own behalf, while money transmitters would use the software to act as transmitters or intermediary financial institutions in the business of accepting and transmitting value. Vendors that offer anonymity software are not considered money transmitters under these guidelines. According to Coin Center, based on the facts presented in the allegations, Tornado Cash appears to fit FinCEN’s definition of an anonymous software provider more than a money transmitter. The article also states that the government believes that the defendants "advertised" the Tornado Cash tool and "profited" from the governance tokens associated with the smart contracts, but that these activities did not amount to "accepting and transmitting" currency. According to previous news, Roman Semenov, founder of Tornado Cash, has been arrested. The U.S. Department of Justice accused Roman Storm and Roman Semenov, founders of Tornado Cash, of violating money laundering and sanctions regulations and conspiring to operate an unlicensed money transfer business.