Kevin O’Leary says sacrificing Tornado Cash for institutional adoption is worth it

There is a need to crack down on crypto applications that “mess with the primary forces of regulation,” says Shark Tank host and millionaire venture capitalist Kevin O’Leary, who argued that Tornado Cash and similar services are preventing real institutional capital from entering the space.

In a discussion on Crypto Banter on Saturday, O’Leary, also known as Mr. Wonderful, suggested that applications such as Ethereum-based crypto mixer Tornado Cash are part of a “crypto cowboy” culture that should not have a place in the industry.

Instead, O’Leary believes that crypto needs a “rules-based environment” to attract real institutional capital into the digital asset industry, and much of that regulation needs to knock out protocols like Tornado Cash, which enable users. to carry out anonymous transactions and therefore potentially engage in criminal activity.

In the discussion, O’Leary did not back down on his opinion on the arrest of Tornado Cash creator Alexey Pertsev, saying:

“At the end of the day, arresting that guy is fine. Why? He messes with the regulatory forces […] If we have to sacrifice him, that’s fine, because we want to have some stability in the institutional capital.”

The venture capitalist said that while institutional interest in the digital asset sector continues to increase, “they’re not going to touch it while crypto cowboys ride the fence.” O’Leary stressed that “until we get rid of this shit,” there will be no “stability in”. […] institutional capital’, but he believes that the industry is slowly but surely weeding out the ‘cowboys’:

“I think we’re getting to that stage now. Maybe we’re in the third or fourth innings against it, but I’m sick of this crypto cowboy crap. I want to get involved in a regulated place where we can bring billions of dollars to work. I don’t need to be a crypto cowboy and I don’t want to be because I work in the regulated world.”

But O’Leary’s opinion flies in the face of the sentiments of many in space. The US government’s sanctioning of the Ethereum-based privacy tool last week infuriated many influential crypto figures who defended the need for basic privacy rights on decentralized networks.

Gnosis co-founder Stefan George was one of those who defended Tornado Cash, states that the protocol brings “much-needed privacy” to Ethereum and that writing open source software should be recognized as “an expression of free speech.”

Chainlink Lead Developer Attorney Patrick Collins as well so that the decision to remove Tornado Cash’s GitHub account is “much worse than sanctioning a website” because code is speech and by doing so the US Treasury violates the First Amendment of the US Constitution.

Ethereum educator Anthony Sassano shared in a tweet to his 218,000 followers that he was temporary shut out from decentralized finance (DeFi) lending protocol AAVE, after his address was blacklisted for receiving 0.1 Ether (ETH) from an anonymous person via Tornado Cash. Sassano went on to note that “the main conclusion I’ve come to from recent events is that Ethereum is more of a concern for governments/nation states than Bitcoin.”

Related: Tornado Cash co-founder reports being fired at GitHub as industry reacts to sanctions

Last week, the Dutch financial crime authority, the Fiscal Information and Investigation Service (FIOD), arrested a 29-year-old Tornado Cash developer suspected of being involved in money laundering via the protocol.

According to a Dutch regulator, over $7 billion has flowed through Tornado Cash’s smart contracts since its inception in 2019. The US Treasury Department sanctions came after several allegations that the protocol had been increasingly used for money laundering activities.