Good morning and happy Friday. As Congress wraps up April recess, the founder of The Rage - an independent publication focused on financial surveillance – shares her thoughts on building a media project through crypto donations, Tornado Cash sanctions, Roman Storm’s case, and more key issues on the financial privacy front.

Interview - The Rage

Crypto & Independent Media

Q1: What is the The Rage and why do you think it’s important to have a publication uniquely focused on financial surveillance?

A1: Financial surveillance – or financial privacy, rather – is in so far important as that our finances form a virtual, real-time biography of our lives. From our medical histories to our political affiliations and our sexual orientation, from the people we spend time with to the places we frequent, all of this is available to someone that has access to our financial records. Seen from this point of view, financial privacy is really the pillar on which many other rights rest upon.

The Rage is an independent publication aimed at challenging the often celebratory tenor in the industry as it relates to new policy and technologies. Having worked for several large publications in the space, I was frustrated that coverage often appeared to be guided by investor or advertising interests, as well as by the need to retain friendly relations with potential sources in office.

In contrast, our editorial policy is not contingent on exclusive interviews with members of Congress or investors and advertisers. Instead, we primarily work with public information and expert analysis, which allows us to step on toes when necessary.

Q2: Why did you choose to fund your work through crypto donations? What are some of the benefits and challenges with this approach?

A2: Honestly, convenience. By accepting cryptocurrencies – mainly Bitcoin – we were able to accept donations instantly instead of needing to work our way through the financial system, saving us time and account fees often invoked by banks. It also allows our donors to retain their privacy as we cannot associate transactions with clear names, and pay international freelancers without having to go through SWIFT. All in all, it saves us a great amount of time and money.

Challenges mainly occur when we do need to interface with the banking system, but also when having to deal with centralized exchanges. This money was donated to us by an anon on the Internet is generally not a source of income compliance officers tend to accept, which has led to issues in the past.

Q3: How do you see crypto reshaping journalism and media models in the coming years? For example, do you see crypto helping more independent or niche publications break through?

A3: On the one hand, I think that cryptocurrency allows journalists to finance their work who may not have access to traditional funding systems, like PayPal or GoFundMe, which in turn fosters a more diverse set of voices. On the other, it allows those who may be financially censored to continue their operations – we saw this early on with Wikileaks utilizing Bitcoin after facing a banking blockade. In my opinion, when a currency is censorship resistant like Bitcoin is, we can see a future where the ability to practice free speech is increased, while more independent publications can flourish due to the ease of access to monetization.

Tornado Cash & Roman Storm

Q4: On March 21, Treasury’s Office of Foreign Assets Control removed Tornado Cash from its list of sanctioned entities. As someone who has closely covered the Tornado Cash sanctions and related litigation, could you explain why this delisting is not the end of the Tornado Cash story?

A4: OFAC’s Tornado Cash delisting is interesting as its ramifications are rather implied than explicit. The Treasury did delist Tornado Cash following a Fifth Circuit ruling, but is currently trying to prevent a Texas District Court from issuing a ruling on the matter. By effectively arguing that the problem is solved because Tornado Cash isn’t on the list anymore, the Department is seemingly attempting to retain the power to put Tornado Cash back on OFAC’s SDN list and sanction other software like it. Until the Texas District Court’s ruling is issued, nothing prevents the Treasury from continuing to criminalize software; in addition to Tornado Cash developer Roman Semenov still being OFAC sanctioned for writing code.

The Treasury’s press release that accompanied the Tornado Cash delisting did not really help clarify the Department’s stance on privacy services either in my opinion, in which Treasury Secretary Bessent issued what I felt was a fairly stark warning for users of privacy software like Tornado Cash to exercise caution when accessing services used by illicit actors. To me, it continues to feel very opaque as to what the Treasury’s policy on privacy services is going to be going forward, despite Tornado Cash being delisted.

Q5: The Rage has also closely followed the Justice Department’s prosecution of Roman Storm, one of the developers behind Tornado Cash. Where does the case stand procedurally today, and what are the key legal issues at the center of this case?

A5: Roman Storm is mainly being prosecuted under US Money Service Business registration laws. The main question in his case is whether developers of non-custodial software, who do not hold control over or access to user funds, can be held liable for the actions of their users. As such, the case could set dangerous precedents for the development of software overall.

The US is the only country I am aware of in which writing code is understood to be protected as free speech. If Roman can be held liable for what others do with his software, nothing stops the DOJ from holding the developers of Signal or WhatsApp accountable when criminals use it. The ramifications of his conviction would not just be detrimental to the right to privacy, but also to the US software industry as a whole. I find it interesting that the current administration, which has explicitly stated that fostering local innovation was one of its goals, would allow a case that could potentially threaten to overturn Bernstein v. US to proceed – a landmark decision that has arguably helped turn the US into the tech powerhouse it is today.

The irony of it all is that Roman Storm came to the US from Russia to exercise and further the freedoms that the United States are built upon – the freedom to build cutting edge technology, as well as the freedom for anyone to exercise their right to free speech without fear of prosecution. I can’t think of anything more patriotic than that. Instead, he is now facing decades in prison. His trial is set for July 14th.

Financial Privacy Policy

Q6: Last week, the Department of Justice published a memo outlining a shift in its enforcement priorities around digital assets. What do you think this memo got right? What further actions would you like to see DoJ take to ensure that developers of non-custodial software aren’t held criminally liable for how third-parties use their code?

A6: I was super excited when I read the memo. It seemed that the DAG had hit the nail on the head: software developers should not be held liable for what others do with their software. However, when delving into the details, it quickly became clear that the memo made a range of exceptions to its alleged new stance that it can hardly be seen as anything more than lip service. For example, the DAG specifically excluded 18 U.S.C. §1960 subsection (B)(1)(c) that is currently being used to prosecute Roman Storm, as well as William Hill and Keonne Rodriguez, the developers of the non-custodial privacy wallet Samourai Wallet. It also appeared to directly avoid the term non-custodial – or “unhosted”, as it’s more widely used in policy circles – likely to refrain from setting new guidance. In my opinion, the memo does little to establish the much needed clarity.

To foster innovation and protect developers, the DOJ should drop the charges against Samourai Wallet and Tornado Cash developers, and FinCEN should clarify that non-custodial services are exempt from MSB statutes.

Q7: When debating crypto legislation, lawmakers on both sides of the aisle often agree that public, transparent blockchains can help law enforcement trace and recover illicit funds— especially compared to cash. At the same time, there’s bipartisan concern about the use of mixers and other privacy-enhancing tools by bad actors, like North Korean hackers, to launder illicit proceeds.

How would you respond to these concerns? How can Congress address illicit finance risks while still preserving individuals’ ability to use privacy tools for lawful purposes?

A7: I would respond with data. In 2023, FinCEN received over 27M reports, of which 372 resulted in criminal investigations through the IRS. That’s a success rate of 0.001%; if we can even call it a success rate, as not all criminal investigations result in criminal convictions.

These numbers then map onto what we can observe in AML/CFT success rates around the world. In the EU, Europol estimates that current frameworks enable the confiscation of less than 0.1% of illicit proceeds. Globally, scholars place the effectiveness of AML/CFT frameworks at 0.02%, while finding that we spend 507x as much money on compliance programs as we are able to recover through them.

The suggestion to “address illicit finance”, i.e. implement reporting requirements or similar traceability frameworks on digital assets, results out of the assumption that total financial surveillance actually works to stop crime, whereas the data overwhelmingly suggests that this is not, in fact, the case.

With lawmakers contemplating how we can balance law enforcement’s legitimate need to identify criminal actors with the public’s likewise legitimate right to privacy, we are currently rehashing a decades old debate in which the Government runs the risk of attempting to exempt certain groups from their constitutionally protected, inalienable rights. Just like we can only have freedom of speech when we all have freedom of speech can we only have the right to privacy when we all have privacy – that includes privacy from the Government as well as privacy for criminals, as much as that may be a bitter pill to swallow.

In my opinion, to address this issue sensibly, we need to drastically rethink how AML/CFT frameworks are designed. We should focus on making our platforms more secure, not further erode the very principles the US rightfully prides itself on.

Q8: What are one or two crypto-related bills or policies you would like to see enacted this year?

A8: First, Majority Whip Emmer’s Blockchain Regulatory Certainty Act, which would protect software developers from being held accountable for the actions of their users. Only when we are able to keep the brightest minds in software development on shore will we be able to guarantee that criminal actors, such as the DPRK, have less of a chance exploiting our systems, even if they may utilize such technologies themselves.

Second, and this is a big favorite of mine, Sen. Mike Lee’s Saving Privacy Act, which essentially sets out to reform the Bank Secrecy Act by repealing Suspicious Activity- and Currency Transaction Reporting requirements while strengthening Fourth Amendment protections.

The BSA is not only “deeply unconstitutional,” as Sen. Lee has phrased it, by subjecting all US Americans to total surveillance without so much as needing to accuse them of a crime. It also stifles competition, innovation, and financial inclusion: for many, the costs of such compliance programs are simply too much to bear, causing banks to terminate or reject customers that may cause heightened compliance checks.

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You can learn more about The Rage and follow their coverage of financial privacy issues here: TheRage.Co.

Have a great weekend and see you next Friday when we’ll return to our traditional weekly briefing format.

-GSL

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*All information contained in this newsletter is for informational purposes only and should not be considered legal or financial advice. You should conduct your own research, and consult an independent financial, tax, or legal advisor before making any investment decisions. The author may own cryptocurrencies discussed herein.