In 2022, the U.S. Treasury sanctioned Tornado Cash, an open-source privacy tool on Ethereum. Not a company. Not a person. Code. The government effectively declared that software itself could be illegal.

A Dutch court later arrested one of the developers. His crime: writing code that other people used for purposes he didn't control.

This is the frontier of digital freedom, and most people don't realize what's at stake.

The Case for Light-Touch Regulation

Cryptocurrency and blockchain technology represent something genuinely new: permissionless systems. Anyone can participate. No bank approval. No government authorization. No intermediary deciding whether your transaction is acceptable.

This matters for three reasons:

Financial inclusion. Roughly 1.4 billion adults remain unbanked globally. They're excluded from the traditional financial system by geography, documentation requirements, or poverty. Permissionless systems don't care about your credit score or your country of origin.

Censorship resistance. When Canadian truckers protested in 2022, the government froze bank accounts of donors. When Russian dissidents need to move money, traditional rails are closed to them. When activists in authoritarian regimes need to fund their work, they can't use Visa.

Innovation velocity. Permissionless systems allow experimentation without asking permission. DeFi, NFTs, DAOs: whatever you think of them, they emerged because developers could build without regulatory pre-approval. Some experiments fail. Some create genuine value. The point is that the experimentation happens.

Heavy-handed regulation inverts this. It assumes guilt. It requires permission. It slows innovation to the pace of bureaucracy.

The Case Against Heavy-Handed Bans

When you ban something people want, you don't eliminate it. You push it underground.

Offshore migration. Aggressive U.S. regulation has already pushed crypto activity to Singapore, Dubai, and jurisdictions with clearer rules. American users still participate; they just use VPNs and offshore exchanges. The activity continues. The tax revenue and regulatory visibility disappear.

Punishing legitimate users. Privacy tools like Tornado Cash have legitimate uses: protecting business transactions from competitors, shielding personal finances from stalkers, maintaining basic financial privacy that cash once provided. Banning the tool punishes everyone to catch a few bad actors.

Chilling effect on development. When developers can be arrested for writing code, developers stop building in your jurisdiction. The talent goes elsewhere. The innovation happens elsewhere. You're left regulating an industry that no longer operates within your borders.

The U.S. invented the internet. It's in danger of ceding the next financial infrastructure to countries with clearer, more permissive frameworks.

What to Regulate

Regulation isn't inherently bad. The question is what you regulate and how.

Fraud. Scams, rug pulls, and Ponzi schemes are already illegal. Enforce existing laws. You don't need new crypto-specific legislation to prosecute someone who steals money.

On-ramps and off-ramps. The points where crypto meets traditional finance (exchanges, banks, payment processors) are natural chokepoints for KYC/AML compliance. Regulate the interfaces, not the underlying technology.

Stablecoins. Tokens pegged to the dollar function like money market funds. They should have reserve requirements and transparency obligations. This is reasonable.

Centralized custodians. If you're holding other people's money, you should be regulated like a financial institution. FTX collapsed because it was a centralized, custodial exchange with no oversight. The problem wasn't crypto; it was a traditional fraud enabled by regulatory gaps.

What Not to Regulate

Self-custody. Your right to hold your own money without an intermediary is fundamental. Requiring permission to control your own assets is not regulation; it's confiscation with extra steps.

Open-source code. Code is speech. Developers writing software are not responsible for how others use it. We don't arrest gun manufacturers for murders, car makers for drunk driving, or kitchen knife producers for stabbings. The same principle applies to code.

Privacy tools. Financial privacy is not inherently suspicious. You don't publish your bank statements. You don't broadcast your salary. The desire for privacy is normal and legitimate. Tools that enable privacy should be legal.

Peer-to-peer transactions. Two people exchanging value directly, without an intermediary, is the oldest form of commerce. Requiring government approval for every transaction is surveillance, not regulation.

The Digital Civil Rights Frame

Here's the frame that matters: the right to transact privately is an extension of speech and association.

The First Amendment protects your right to speak without government approval. The Fourth Amendment protects your right to be secure in your papers and effects. Financial transactions are both: they're a form of expression (supporting causes, buying goods, paying for services) and they're private papers.

When the government can see every transaction, freeze any account, and ban any tool, you don't have financial freedom. You have financial permission. And permission can be revoked.

The activists, dissidents, and journalists who need financial privacy the most are exactly the people governments most want to surveil. Building backdoors for "legitimate" law enforcement means building backdoors for authoritarian abuse.

The Reasonable Middle

The crypto space has its share of scammers, speculators, and ideologues. But the technology itself is neutral. It can be used for good or ill, like any tool.

The reasonable position is:

1. Enforce existing fraud laws. You don't need new legislation to prosecute theft.

2. Regulate chokepoints, not protocols. Exchanges, custodians, and fiat interfaces are where compliance makes sense.

3. Preserve self-custody and privacy. The right to hold your own money and transact privately is fundamental.

4. Don't criminalize code. Developers are not responsible for user behavior.

5. Provide regulatory clarity. The worst outcome is ambiguity. Builders need to know what's legal.

6. Compete globally. If the U.S. makes crypto development impossible, the development moves elsewhere. The technology doesn't disappear; American influence over it does.

What's Actually at Stake

This isn't really about crypto. It's about whether digital systems will preserve the freedoms that physical systems once provided.

Cash is anonymous. You can hand someone a $20 bill and no one records it. As commerce moves digital, that anonymity disappears unless we deliberately build systems that preserve it.

The question is whether we want a future where every transaction is surveilled, every account can be frozen, and every tool requires permission. Or whether we want to preserve some space for privacy, autonomy, and permissionless innovation.

The crypto debate is a proxy for that larger question. And the answer we choose will shape the digital infrastructure for decades.

Regulate fraud. Regulate custodians. Provide clarity. But don't ban the tools, criminalize the code, or eliminate the privacy that makes freedom possible.

The right to transact privately isn't a loophole. It's a feature. Protect it.