SWIFT considered “neutral” on sanctions; a debate has erupted over whether Ethereum is the same


Coin Center Research Director Peter Van Valkenburgh made an interesting point on Monday when he tweeted a screenshot from SWIFT’s website detailing the entity. role in sanctions enacted by the “national authorities”.

Comments on the tweet immediately compared the information to Ethereum’s role in processing transactions.

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 more than 200 countries”.

Van Valkenburgh’s tweet said that SWIFT “does not monitor or control the messages that users send through its system”. Moreover, he clarified that “

“All decisions on the legitimacy of financial transactions under applicable regulations, such as sanctions regulations, rest with the financial institutions that handle them… With respect to financial sanctions, SWIFT’s objective is to help its users fulfill their responsibilities to comply with national and international regulations.

The rest of the SWIFT website page explains that “SWIFT is only a messaging service provider and has no involvement or control over the underlying financial transactions”.

Interestingly, in response to the question “Is SWIFT evicting banks”, the answer states: “SWIFT is neutral”. However, it confirms that it “disconnected all designated Russian entities” under EU regulations in 2022.

Comparison with sanctions on Ethereum

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

Ethereum handles transactions between 674,265 entities per day, with nodes operating in over 64 different countries.

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

However, over the weekend it was revealed that Ethermine, the largest mining pool on Ethereum, is no longer processing blocks containing Tornado Cash transactions. While this is within the rights of any validator (either PoW or PoS), it is a step towards censoring Ethereum at the protocol level.

The role of a miner or validator on a blockchain is to process, secure and verify transactions within the network. They are an integral part of the network infrastructure, not a protocol-based application.

CryptoSlate reached out to Ethermine for comment, but could only reach mods on its Discord community. The mods assumed the decision was made to ensure compliance with US sanctions. However, if SWIFT’s model were to be followed, there could be an argument that Ethermine doesn’t need to make such drastic changes.

Is Ethereum neutral?

Should Ethereum be considered a neutral entity, with users being held accountable for their own actions regarding sanctioned entities? SWIFT can back up its assertion that “the responsibility for ensuring that individual financial transactions comply with sanctions laws…lies with the financial institutions that process them.”

The argument can be expanded further to argue that Tornado Cash could be considered a neutral entity because the Tornado Cash protocol itself does not launder money, users who use it make that choice.

The definition of a “financial institution” within a decentralized ecosystem is unclear. One of the most important aspects of crypto regulation will likely involve confirming legal definitions of blockchain terminology. In the EU, this is already happening and could form the basis of crypto regulation in the future.

There are other ways to launder funds through privacy-focused assets. Cash can be used easily to launder funds due to its built-in secrecy mechanism as it is a physical asset that can be moved without a trace. No penalty is imposed on the money itself if a criminal uses money to launder funds. Therefore, why were all Ethereum addresses linked to Tornado Cash sanctioned?

There are no simple answers to these questions. However, it is clear that old laws are being applied to new technologies, and there is a need for technologists and legislators to collaborate on this topic to ensure the free and fair development of decentralized networks.


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