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Banking & finance
Opinion
Tomicah Tillemann
Tomicah Tillemann

The View | Financial services must harness blockchain to balance digital security with privacy

  • Virtual currencies and blockchain technology are criticised as being conduits for crime, yet many users still prefer them to traditional banking, where data privacy is severely lacking
  • Finding a middle ground between freedom and accountability means financial services must look to what Web3 technologies can offer

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Financial transactions involve handing over huge amounts of personal data, which can be abused. Photo: TNS
Tomicah Tillemann
The US Department of the Treasury’s Office of Foreign Assets Control recently sanctioned a technology called Tornado Cash, on the grounds that it “has been used to launder more than US$7 billion worth of virtual currency since its creation in 2019”.
Such enforcement measures are nothing new. But what makes this case unique is that Tornado Cash is a piece of open-source software.

Essentially an automated tool, Tornado Cash mixes digital assets and redistributes them to preserve privacy. While we don’t know everything about Tornado Cash or why it was created, we do know that large sums of digital assets linked to illicit activity have moved through the protocol since it was launched, including millions stolen by North Korean hackers. Any American who uses the service now faces up to 20 years in prison.

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Some believe that such sanctions are necessary to prevent money laundering, while others see them as a sign of government overreach. But whatever one’s perspective, it’s worth asking why there was a need for a protocol like Tornado Cash in the first place. The short answer is that our financial system is failing to balance privacy and security. Fortunately, this is a challenge that Web3 (blockchain) technologies could help to resolve.
The Department of the Treasury building in Washington, US, on August 20. Photo: AFP
The Department of the Treasury building in Washington, US, on August 20. Photo: AFP

As a senior adviser to two US secretaries of state, I spent time in dozens of countries examining how different systems affect individual rights and democracy, and helping to design technologies and applications to strengthen open societies. In the course of this work, I have seen today’s finance systems failing by virtually every measure.

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