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Crypto Weekly: The US says no to mixers

Mads Eberhardt

Cryptocurrency Analyst

Summary:  The U.S. Department of Treasury has blacklisted the largest mixer on Ethereum used in hiding blockchain traces. On to companies, Coinbase and BlackRock have announced a partnership in trading and custody of Bitcoin, while Nvidia feels the heat of the upcoming Ethereum merge.


The U.S. Department of Treasury blacklists mixer Tornado Cash

Yesterday, the U.S. Department of Treasury blacklisted every smart contract and address connected to Ethereum-based mixer Tornado Cash for its use in money laundering. The latter is a popular decentralized protocol used to hide the blockchain trace of Ether and Ethereum-based tokens. It has allegedly been used by North Korean state-backed hacking group Lazarus Group in a $615mn hack earlier this year, however, the protocol is also used by ordinary people wanting to interact on Ethereum with a higher degree of privacy. Elliptic, a blockchain analytics company, has estimated that over $1.5bn has been laundered through Tornado Cash out of a total amount of $7bn. The blacklisting bans American citizens alongside American entities such as exchanges from engaging with clients depositing funds from Tornado Cash.

Since the protocol is fully decentralized, governments cannot disable the protocol itself. However, since many crypto users and exchanges are based in the US, the blacklisting might be enough to remove sufficient liquidity from the protocol for it to work properly. This was somewhat the case some hours after the announcement yesterday, as the issuer behind the second-largest stablecoin Circle froze every USDC in Tornado Cash’s smart contracts, meaning users are not able to transfer them out of Tornado Cash anymore.

Coinbase and BlackRock announce partnership

Coinbase announced a partnership with the world’s largest asset manager BlackRock last week. The partnership enables institutional clients of BlackRock to access Bitcoin brokerage and custody facilitated by Coinbase but handled through their existing portfolio management. Even though we are in a bear market it does genuinely not seem that institutions are shy to interact with crypto, as also both Morgan Stanley and Citigroup have announced positions concerning crypto in the past week to strengthen their internal crypto resources. On another note, Coinbase is set to announce its Q2 earnings later today.

Nvidia feels the heat of the Ethereum merge

As Ethereum miners generated a record-high revenue of $16.5bn in 2021 by validating blocks on the network, there was an equal demand for GPUs utilized in mining operations. Nvidia has for years been the main supplier of GPUs to Ethereum miners. Although Nvidia does not directly state its revenue from providing GPUs to mainly Ethereum miners, it is anticipated that the company generates an appreciable part of its revenue from miners. However, that may soon come to an end, since the Ethereum merge is expected to happen sometime next month, completely taking miners off the equation. Since miners have known this for some time, it seems few acquire new equipment, as it will be challenging to break even in such a short period. It seems Nvidia felt this in its second quarter (ended 31st July). The company cut its expected revenue to $6.7bn from $8.1bn yesterday while simultaneously writing down its inventory by $1.3bn, mainly since the secondary market of GPUs has been flooded by cheap GPUs. If the merge occurs successfully in September, then the market of GPUs used in Ethereum mining will by default never exist again.

Bitcoin/USD - Source: Saxo Group
Ethereum/USD - Source: Saxo Group
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