FTX Restricted a User From Interacting with ZK Money
- The FTX crypto exchange has terminated a user’s account who sent money to the Aztec Network.
- The decision comes after Tornado Cash, a mixing service, was blacklisted on money laundering charges.
- The crypto community was infuriated by the limitations imposed by FTX, with some claiming that a privacy preference should not be penalized.
FTX appears to be preventing users from sending funds that have interacted with the privacy-focused Aztec protocol, which employs zkSNARKs technology to improve the anonymity of Ethereum transactions. Colin Wu, a Crypto Reporter, revealed this.
FTX has designated the Aztec Connect network as a high-risk mixing service forbidden by the trading platform’s guidelines.
This assertion is supported by screenshots and tweets made by many FTX users. FTX’s industry-leading third-party transaction monitoring tools prevent users from interacting with high-risk addresses.
One user reported that his FTX account had been frozen for transactions to and from the service. Another suggestion was to deal with customer support privately to avoid problems.
Aztec, a London-based startup, launched the platform’s second iteration in 2020, based on the ZK-Rollups second layer scaling technology. Adopting zkSNARK’s zero-knowledge proofs allows for transaction aggregation, raising performance to 300 TPS.
zkSNARK additionally conceals sender, recipient, and transaction details, keeping transactions confidential.
The crypto community was outraged by FTX’s restriction, with some arguing that the demand for anonymity should not be criminalized or punished. Others have highlighted that a portion of wallets may be restricted simply for indirectly connecting with private layer-2s such as Aztec.
Netizens like @Jaimin___ Patel find it ridiculous that users have to suffer the repercussions of demanding privacy.
On August 8, the US Treasury sanctioned Tornado Cash, a prominent Ethereum mixer. Authorities have charged the firm with assisting the laundering of more than $7 billion in cryptocurrency, including monies obtained from North Korean hackers.
Aztec CEO Zac Williamson challenged Tornado Cash’s punishments on Twitter, saying, “there is a brief window where heavy-handed regulation might stifle the innovation required to bring us there.”
Other platforms that take the same strategy as Tornado Cash will likely face the same scrutiny, resulting in additional transparency measures.