Aztec Protocol Flagged by FTX After CEO Criticizes Tornado Cash Sanctions

Crypto exchange FTX flagged the Aztec protocol and its services, citing “high risk”, according to tweets and screenshots by numerous FTX users. FTX’s action comes after Aztec CEO Zac Williamson spoke against the recent sanctions imposed on the crypto mixer Tornado Cash, arguing “there is a short window where heavy-handed regulation could strangle the innovation required to get us there.”

The technology we’re building is not yet advanced enough to serve their needs.

There is a short window where heavy-handed regulation could strangle the innovation required to get us there.

The people worst affected have no voice; will you speak for them?

— Zac Williamson (@Zac_Aztec) August 16, 2022

FTX Freezes Accounts that Interacted With Aztec

Bahamian cryptocurrency exchange FTX flagged the privacy-focused protocol for Ethereum, Aztec, due to high-risk activities involved with the tool. The company is reportedly blocking users from making transactions with funds that interacted with Aztec services including Aztec Connect, Aztec Network, and, according to screenshots and tweets provided by FTX users.

One of the users said his account on FTX was frozen because he interacted with Aztec. Furthermore, the FTX allegedly asked some of its users to provide information regarding the origin of their funds and the purpose of their trades.

The move by FTX comes more than a week after the U.S. Treasury imposed sanctions on the crypto tumbler Tornado Cash and 45 Ethereum wallet addresses related to the service, due to money laundering allegations. The Treasury claims Tornado Cash has been used to launder more than $7 billion worth of digital currencies since its launch.

Zac Williamson, Chief Executive Officer of Aztec, posted a multi-thread tweet where he slammed the sanctions against Tornado Cash. Williamson thinks a more effective way for the U.S. regulators was “to require off-ramps to use the TornadoCash compliance tool instead of a blanket ban.”

“The depressing thing is that we’ve been through this already with the World Wide Web. We don’t arrest internet service providers for the data in their cables. We don’t arrest DNS providers for signing illegal traffic.”

– Zac Williamson

Crypto Community Slams FTX For Flagging Aztec

FTX’s decision to flag Aztec was not welcomed by the crypto community, with some of them arguing a need for privacy shouldn’t be criminalized. However, others believe the move underscores FTX’s worries about its exposure to high-risk crypto addresses.

Crypto services like mixers and cross-chain bridges have been facing increased scrutiny lately due to a sharp jump in illegal money activities this year. A recent survey by a blockchain analytics firm showed that cross-chain bridge RenBridge has been used to launder $540 million of dirty cash.

The number of attacks on decentralized finance (DeFi) protocols soared by a whopping 1330% last year, research shows. One of the biggest crypto heists of the year was the Ronin hack, where over $600 million was exploited.

This article originally appeared on The Tokenist

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