FTX has reportedly started blocking accounts that have sent coins via zk.money, a private Layer 2 chain provided by the Aztec Network on Ethereum. According to Twitter users, FTX has identified the DApp as a cryptocurrency mixer, a service it considers a “high-risk activity” banned by the exchange.
Complaints about blocked transactions on FTX began circulating on Twitter on Thursday, sometimes with comments about FTX’s motives and allegations that zk.money is not a mixer. Twitter users also pointed out that blocking transactions related to the protocol may involve a ban with far-reaching effects, similar to the sanctions imposed by the US Department of the Treasury on Tornado Cash users. The US agency included on August 8 more than 40 USDC and ETH addresses in the list of specially designated nationals of the Office of Foreign Assets Control (OFAC).
Recently, FTX froze a user account who sent coins to @aztecnetwork ‘s zkmoney. According to FTX, Aztec Connect – Aztec network / zk money has been identified as a mixing service, which is a high-risk activity prohibited by FTX.
— Wu Blockchain (@WuBlockchain) August 19, 2022
The CEO of Aztec Network, Zack Williamson, posted a lengthy Twitter thread on Monday commenting on the situation surrounding Tornado Cash, days before FTX’s apparent action against the network. “There is a place for regulation in Web 3.0. It’s not at the network level. It’s at the application level,” Williamson wrote, adding:
“The saddest thing is that we’ve already been through this with the World Wide Web. We don’t arrest internet service providers for their wire data. We don’t arrest DNS providers for signing illegal traffic.”
In light of the TornadoCash ban, I have some thoughts on the future of privacy networks that I would like to share with you all.
Despite the dark circumstances of the present, there are grounds to be optimistic about the future for web3.
A short on why…
— Zac Williamson (@Zac_Aztec) August 16, 2022
Zk.money was launched in March 2021. It describes itself as the “Private DeFi Yield Aggregator” from Aztec Network’s Aztec Connect Software Development Kit.. Aztec Connect, in turn, “works like a VPN: using the Aztec rollup contract as a proxy.” On Thursday, Aztec Network announced that Aztec Connect was preparing to receive funding from DEX Balancer Labs.
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