Fireside Chat | Code on Trial | ETHDam III - 2025

Welcome to Eat the Dog. to Eat the Dog. to Eat the Dog. to Eat the Dog. to Eat the Dog.

Thank you for uh Thank you, Alexey, for joining us and sharing sharing your story. Thank you. Without further ado it is my honor to welcome the lady who's been fighting for him, fighting for Alexey, to make a difference as well as a man who's going to be here today to discuss the legal aspects behind this. You heard the man. Now, let's hear from the legal team.

I would like to welcome to the stage Youri Djorkaeff and Joachim from the European Commission who are trying to change these institutions and who are trying to make a difference and who are fighting for Alexey. The judging continues. Thank you. Right. So, what can we say after this impressive speech?

But, I think we can add a little bit more substance to that. My name is Joachim Schwerin. I'm principal economist in a part of the European Commission that deals and we've just been reorganized with responsible business practices, whatever that is. My background over the last more than 10 years, I'm now working there for 24 years, is basically everything related to blockchain crypto tokenization. The Commission made a statement more than 10 years ago that we see blockchain at the same level as AI and quantum and couple of few other breakthrough technologies as something absolutely positive that we support.

Because for me as an historian, it is in line with the DNA of humanity and that is self-organization and the respect for different values of communities. Now, Judith, before we discuss this, I have two observations and I still can't get it. The first observation is that we have no rules in place in our legislation or regulation that prohibits mixers in any form. And I know that because I was in all the teams that wrote them. I worked on MiCA.

I worked on transfer of funds. I was sitting in the committee to fight and to fight money laundering and terrorist financing. And there's nothing that prohibits this. It's even worse from the other side's perspective. The first crypto law is the GDPR because data belong to the people that create them and we need to protect these data.

That's why we don't like the big tech. That is why we think that Web3 is a self-organized and decentralized space. Number two, my responsibility is mainly the real economy. I'm a German. I'm proud of our car producers because we produce the best cars in the world.

Every decent bank robber drives a German car. It's an Audi or a BMW. They don't drive Mercedes. That's for elderly people, but young people drive Audis and BMWs. There are the technical means to prevent any bank robbery.

Your car is full of cameras. Your car can be shut down remotely. You can trace and track everything with the GPS and our systems in Europe are better than the American GPS. There is no law enforcement authority whatever that comes remotely to the idea to arrest the CEO of BMW and Audi because bank robbers use cars. I don't understand you read how a court can come to the conclusion that you program stuff.

It's open source, you put it out and you are made liable for the actions of those people that use your product. Can you explain that to me? Well, that's a great question and I can't. Thank you. But what I can explain is to yeah, to basically give you a little bit more explanation of what the court decided.

And I think that's important to know what the court decided. Um because that's basically the basics of understanding what we're fighting in appeal. Um if you look at the court decision and then we have to first go back to the charges. What are the charges? And Alexy already explained it as well.

He is being charged with and convicted for um committing money laundering. Not facilitating, not being part of some kind of conspiracy. They say he actually committed the crime of money laundering. And that needs to sink in a little. Because what does that mean?

When do you enact a crime? And this has been legally fascinating for me as well because even before I was his appeal lawyer, I was like, how the hell are they going to prove that he committed the crime? If you think about the perpetrator, you think about a human being who enacts a crime. It's maybe the person that deposited or withdrawn. So, how will how have they done this?

Um And then it's also good to understand that there's also an other legal concept. Um how you can perpetrate. And you can also be regarded as a perpetrator if you are functionally the perpetrator. Uh and what does that basically mean? That means that you have control over the act and the person who acts in a way um you know that a crime is going to happen or is happening and you fail to prevent it.

And that is interesting because also in literature, people are now looking at the concept of okay, maybe we should not only use this this this new legal concept for for instance uh when you have control over person or an act, but maybe we should extend it to AI tools. When an AI tools enacts something or does something, commits a crime, who should be held responsible for that? Um and what the court does, it it it mixes up legal concepts. It it basically makes a mixture of everything. And I'm not alone in this.

We have an expert, professor in criminal law, who says the application of these legal concept of being a perpetrator are flawed by the court. So, I'm not alone in this. Um but so what the court does, just to take this a little bit in steps. First of all, they say Tornado Cash is is well, it basically it breaks the links between the deposit and withdrawal. And by doing that, it yeah, it it harms the traceability on the blockchain.

But the conclusion is very interesting because they say this is the essence of money laundering. And this is something where I think the decision is completely flawed because guys, this is not the essence of money laundering. Holding something private, hiding something is the essence of privacy, a human right. But by doing this, they have qualified Tornado Cash as some kind of money laundering tool. This is what it is.

Um and then and and and I think this is something that is will be very important for the appeal. We have to show them that Tornado Cash has been used for the good, mostly. It has been used by people to enact their right to privacy. Because that is what it is. And then but this is not what the court has done.

So, we have to deal with this right now and what this next step that what they say and that is also very interesting. They say well, this tool actually committed the crime of money laundering. Because yeah, it's a tools and and it's been designed to to to launder money because it's the essence of money laundering. So, it's actually the tool that committed the crime. And I haven't seen a judgment anyway that takes that takes that stance.

I mean I I don't know. Have you ever seen a judgment for murder where they say this knife this knife really really murdered this man and now we're going to see who's going to be responsible for that. I mean, a piece a knife doesn't know whether it's cutting a piece of steak in a kitchen or it's penetrating through a heart. A tool is neutral. And that is something we also have to get across in the appeal.

A tool is neutral. You want to I want to I don't want to correct you, but we have checked this globally because work on digital identity is on the forefront of what we do. And there is actually one non-human life form and one non-corporate life form that has an identity globally and that's the river in New Zealand. That's the only example that we know where a river actually in New Zealand has a legal entity and can sue people successfully by polluting it and stuff. That is the only global example existing, but otherwise no, there is nothing else that is a tool and has a digital identity.

But then this river has been acknowledged by law as a legal entity. So that is the first step. I I don't think that has been the case in this this situation. Um But the next step, what is the court then does is, okay, so why is Alexey responsible for these acts of this tool? And they don't need a lot of words to get there.

They basically say, you developed it, you deployed it, and you remained actively involved with the project, and you didn't take any KYC KYT measures. Um uh but more importantly, you knew that criminals were using it and you were not stepping down from the project. I mean, it wouldn't make any difference whether he was implement menting some some things extra things in the UI or creating a relay registry. I don't care. It wouldn't have made a difference if he would have stepped down, and I think it proves itself.

I mean, they put him behind bars. The tool is still functioning. The protocol is still still operating. So, this is also something we have to get across in uh appeal. But, as Alex also already said, dis-immunability is something that actually have been as an important element for the court because they are saying, "You deliberately designed it this way.

You said, you you thought of of this tool, and then you made it immutable. So, now you're responsible for everything that happens now. And I think that is pretty scary." It is scary for a number of reasons. And maybe before we go into that a little bit deeper, just one additional observation, and I have another question on on that to you before we come to the implications.

We know that a lot of governance globally are using mixers. I speak a lot because that's my function to talk with the biggest industrial companies in Europe. And I can give you a list of companies in in Germany that you see in the news regularly that use mixers and other obfuscation technologies because they are engaging in crypto payments, they are having new projects where they don't want their competitors to know with whom else they interact, and therefore they don't want to have the transaction streams with the data available. The problem is that no one talks in public about that. But at the same time, while I would say so many doing that even in the traditional sector, we have what I would consider as flawed statistics from certain companies that label transactions because they're not fully transparent according to their criteria as 100% illegal and a criminal, and that is being taken up.

So, given that privacy is so important for everything that we do in the data economy and especially in Europe where we have the GDPR and where we see that as a fundamental human right, how can it be that a court doesn't even consider the notion of privacy? Or what is your experience in the discussion of privacy? If you bring forward these arguments, what is the response response you get? Yeah, I I I think that courts and governments are being just at the moment very hesitant with regarding to privacy. I think KYC and KYT are like the main things right now.

And that is uh as long as the government has access and can trace, then it's all good. Um but this this this is a problem. They don't recognize it. They think it's something scary. Privacy is something that is being used by criminals.

And that for us is a major problem. I mean, we know that we have no lack whatsoever of innovative minds or startups or creative companies in Europe. I would say that when it comes to blockchain and related technologies, we have related to the population that we have more creativity and more startups than we have in in most parts of the world actually. So, we've lost the battle for web 2, which is completely I would say infested by big tech, but I think we have a very good head start in what I would consider as as web 3. But that requires programmers, that requires developers, that requires coders.

And I find it interesting in in a moment where for example, we at the European Commission as the guys that propose stuff, you're not the government that puts that into law. We are the guys that make the technical proposals. Sees competitiveness and sees how we see ourselves in Europe as becoming more independent, more resilient, so important, and we want to have the companies to build that stuff, then suddenly comes a regional court and says that none of this should basically be done. And I feel the effect every day because I regularly talk to developers everywhere. I go to events.

I have these people coming to me. I'm engaged with them and I know what negative effect on innovation we get even from the uncertainty that we have from this case. So for me that is a major negative repercussion on this. And I'm very happy to hear that, but why is nobody speaking up? Why is nobody speaking up in politics?

Why is nobody speaking up in the media about this? This needs to get across. Um that this decision has an effect on innovation. Um that throwing a developer in jail even when he is not being finally convicted yet. I mean he has spent incredible time in jail just because we don't know the outcome yet.

It's it's ridiculous. And I just if you know a way of how to get this on yeah, across outside this room. I think there are two or three things. And number one is and we don't like that, but we must stop talking about blockchain and DLT and crypto in a way. Because what I see every day is that while we for example as the commission we massively used it.

Some of you guys will know our European blockchain service infrastructure. We have a lot of stuff actually out there that can detect fake products that ensures identity. The cyberpunk panel which half the way sounded to me more like the banking association panel because they got so nice in the meantime, but um they realize what verifiable credentials are and stuff like that. I mean it's really advanced stuff that we are doing in order to to ensure this. But if you speak to anyone apart from half a percentage of people in in Brussels about blockchain, they shut down immediately.

So, they all love the technology. They all bring up new policy programs like ensuring your identity, making all of that cyber resilient, having a digital product passport, tokenization, tons of stuff, etc. It's more and more on the agenda, and no one is talking about blockchain. So, we need to find a way to talk about these things without being too technical, without being too technology-focused, which is also why with the digital freedom declaration that I invite everyone to support, we try to take this discussion out of the blockchain corner in a way. It's similar to other things that are going on at the moment right this week in Maybe you can try to explain a little bit more about this declaration.

We asked it also to put it on the screen, yeah. Thank you. Great. The digital freedom declaration is a is a manifesto of privacy activists, I would say, use that word in the public and private sector that would like to make it clear to society what the merits of privacy and privacy-enhancing technologies are. And it's not in a way sort of standard manifesto where we say, "Hey people, take up your guns, go out there, do stuff, etc."

But really also for the mainstream people to understand that this is of importance for the whole society. What we talk about here is at the end of the day technology that serves all of us. That ensures our data, it ensures our privacy. It also makes our companies better. It has really a business angle because we want these companies to scale in Europe.

It has a societal angle because it basically explains that you cannot separate privacy from other fundamental laws that you have. To say that privacy is an issue, but we like other civil rights is a very bad approach to take because these things are related. And last, but certainly not least, and in my opinion, for me it's the most important point, if you want a zero-crime society, go to China, go to some sort of dystopic, top-down, totalitarian country, because we have never been in a place where we have zero crime. Zero crime means total control, total surveillance. We want to have a society that is responsible, that tries to fight crime, but at the same time realizes that these things are seen in perspective, because freedom has always a positive and has a negative side.

And that is a part of the discussion also earlier today here that I like. We try to minimize crime, but we do not like to take so fundamentally negative action that we eradicate all the freedom together with fighting crime. And this is what many people unfortunately don't understand. And there's one thing here I really say it's between the public and the private sector. Guys, the public sector is not your enemy.

There's a lot of people that I know very well of in the public sector that completely understand all of this because they are human. Because they have the same situation that their family or children that are programming and doing stuff, that they're using these things, and that know all of this. But we have a part in the system that is unfortunately very negatively minded. And when we speak about AML, it is never about AML. It is about people not liking crypto and the challenge that it brings to the traditional system.

And I give you one example, Interpol. Interpol organized an event a couple of weeks ago, where basically they put zero-knowledge proofs in the same corner as any sort of technology that serves criminals and would perfectly like to prohibit all of that stuff. We as the commission, when we build blockchain systems, we use CK proofs and similar technologies all over the place because we know what it is and because it is good. It's not the public sector versus the private sector or the activists, but we want to work together with everyone who understands that to have a society that is democratic, inclusive, and liberal. And this is the reason why we set up the Digital Freedom Declaration.

And I'm very happy with this declaration because you just asked me why does the court not take a stand on privacy in this judgment? And I think that educating on this topic is really important and that is one of the goals of the declaration. And in the appeal, I will have a couple of hours to explain what this is case is about. So, we need to start now. I we should not wait until the appeal date and standing in court.

Yes, that's the final cherry on on the cake, but we need to start now educating and and it needs to be widespread. So, that is this is why I'm really happy with this declaration. And I must say that we have a very positive direction already in the first couple of days that this is out. There is a momentum building up. It is just that and this is something where I would also like to to have your opinion, Judith.

Uh spoke to Alex also before. We mustn't forget that there's a human dimension also in these things. And it's actually a pretty shitty thing to come up with things that might be good for society that are built on the ashes of individual lives. And that is also something that we are observing in cases like this. But unfortunately, it seems to be the human nature that first of all, you have to have a massive crisis or a negative thing to come something positive out of that.

And I give you one example that you all know. I was in the European Commission in 2008 from day one in these committees that saved all these banks when we had the financial crisis for state aid reasons. And the reason is that three quarters of our enterprise in Europe are financed through the banks. So, we didn't save the banks because we like them, but because they have a function. Six weeks after the collapse of Lehman Brothers, and for those you are all too young to know that.

But But read books, actually. Read history books. So, six weeks after the collapse of Lehman Brothers, that was the worst point for the centralized systems, we had the Bitcoin white paper. That is no historical coincidence. Of course, the details are, but the point is when centralized systems have their worst moment, for some reason the decentralized stuff came up.

And that was, of course, we all know, long time prepared. So, I'm very sure that we can build a momentum here in order to really bring forward the values that we describe here. It has to come in a way that is not optimal because we would have loved this discussion without the Tornado Cash case, actually. But the Tornado Cash case brought together a lot of people that probably wouldn't have gotten their act together without it, which is no comfort to Alex, but it is simply how the world unfortunately works. And therefore, let's use this momentum.

I hope that we can convince the court at the end of the day. Legal people look at precedents. And we cannot afford to have a precedent here because this precedent will kill a lot of innovation and growth and jobs that we will have in Europe and a lot of positive things as well. But there's a bigger issue beyond the Tornado Cash case, and this is the society dimension that we are here. But you are undoubtedly very, very aware every day working on this case on the human cost that this has.

And this is also something that we really cannot afford. Yeah, and I think that Alex's His speech was the proof of this, what the impact is on a human being and and criminal law should not be used for that kind of things. Criminal law should only be used when there are very clear rules and there are no clear Well, we started there are very clear rules. There are no rules with regard to these privacy enhancing tools. So, you should not criminalize them in such a way and I think indeed like the the human impact and doing it over Yeah, human life is just horrible.

So, looking forward, I mean, I know it's difficult to say what will be the outcome. I mean, probably one of the first proverbs I heard when I was a small child is that at sea and before court you're on the hand of God. So, let's give God a little bit of hand to to move this forward, but um what is your expectation when you now look forward and what is probably something that you would tell to all of us what we can do to better support the cause? So, you're right. I I don't know what the outcome will be, but I do know that we have a lot of faith and a lot of arguments in court to turn this decision around.

So, that is something I have a lot of faith in, but we also need to realize that we are in front of three judges that think within legal concepts and they do not understand some of the new um technological improvements and it also takes me a lot of time. I mean, I spent hours and hours and hours in jail with together with Alexey and he explaining me things and explaining me things. So, I just ask you if you talk to people, if you trying to make a point, uh be patient and don't get frustrated because they don't understand. This get it get this out of this bubble and be patient to explain it to people so they actually understand and embrace it. And that's probably the last remark from my side as well.

I also stop there because I think I can echo only what you say. We need to get our act together. I am absolutely fed up in my work of individuals, and we had that discussion also before, that consider themselves as individual states. Uh I'm doing this better than you. Uh my concept, technical as it is, is better as yours.

Um I understand that you don't, et cetera. My experience is if you talk at the same level to anyone, and that can be a member of the European Parliament, that can be a government leader, that can be business person, or a normal person on the street, or whomever, if you explain patiently, they slowly get it. They still, and that's what I get in the European Parliament, tell you the party line is not like that. Okay, the party line is not a human being, like a tool. Uh I guess I understand where it comes from, but at the end of the day, it's people that are shaping the party line in the longer term.

We are getting there because this is a demographic thing. It's a generational thing where everyone in your generation automatically understands so much more about the stuff we're discussing here than the older generation. This is also part of why we require patience. It's not that old people are stupid, it's just that they don't know precisely where this come from. So, we have to get this act together, and the strong focus is together.

That's also the one of the reasons why we launched this declaration here, and we have to act as a team. And the team includes the public sector, the private sector. Give us information that we don't have. Give us arguments where we can understand technical stuff in a non-technical way so that we can convince those people that take the decisions and really work together. If there's one thing, and that's my very last remark, why I love blockchain and I can do everything in my life, I have nothing to prove any longer, is that blockchain really for me is what society should be about.

It is about community. It is not this Anglo-American on maximizing the utility of individuals or the profit of companies just isolated one-on-one to each other. Society is a team, and I truly believe that most human beings are team players. So, let's be more team, and let's be less fractionalized of just doing our stuff, but the moment to get us together as a team is now. So, help us.

Thank you, Judith. Thank you, Joachim. Would you like to take some questions from the Slido? Yeah? First question, if multiple devs worked on Tornado, why only Alexey has been persecuted and punished?

I know that's not the case, by the way. There's This is a very successful protocol. Yeah, there was a a lot went through Tornado. A lot went through Tornado. Yes.

Yeah. Uh 7 billion for anyone counting. And and ongoing. Um can we together make some examples to show how Tornado has been used for the good? Like donating to Ukraine from Russia.

Yeah, we have a lot of cases. I mean, I can't tell you really specifically about Tornado because I've never looked at it from that perspective, but we have organized events in in Brussels, for example, where there have been political activists from other parts of the world that can only get their act together by obfuscating information on transactions and interaction. The funny thing, and it is not funny actually, is that uh the same politicians that sit in these events that we organize, when there is someone from Ukraine or Kazakhstan or Tibet or wherever that are using these technologies, are getting a heart attack of joy that uh these activists are using these technologies to fight the Russians and fight the Chinese. But when you use the same technology in a liberal Western country, these people are terrorists. And that is a massive problem.

We We don't have any lack of good examples, and I gave you examples also of industry of what the use of this is in a positive way, but we have an absolute hypocritical Sky Suchkov, I don't know the word in English, a divide, let's make it simple, between those that think we are living in good countries with good values where we don't use these technologies, but when it is against our enemies in the bad countries, it's the most fantastic technology there's out there. Yeah, interesting point. Now, that was my first question when all this happened. Why not propose an EU directive that makes it clear that coding is not a crime? Yes, thank you.

That would be my question as well. Can we do that? That is the biggest question I always get because, surprising as it might seem, uh apparently everyone wants to be regulated and wants to ask for directive and and regulations. And the point that people don't understand is that we are not only the few technical guys like me that sit in the commission and draft this thing. From me you would get that.

But we don't have the right to pass law because we don't have that democratic status. So, when we propose something, it goes to the European Parliament, and it goes to 27 countries. And 27 countries have 27 different governments with different policy lines and party lines. And then they need to come to an agreement. So, every directive or regulation that is out there is actually a compromise between 27 plus three associated countries, 30 countries.

And then you get the level two standards from the European international regulators. So, what is out there is a massive thing where when we write a text like Mika, and I spend a moment on that example. Mika was on liberalizing utility tokens and of allowing stable coins because the government said we need to prohibit all of that, and we didn't. And then everyone comes in who is not involved from the Christian Democrats, the Socialists, the Greens, the Liberals, etc. And they start writing about the environment and social rules and labor and stuff like that.

And all of that has to get in because at the end of the day it's a political compromise. So, when you want to have a directive that all of this is nice, you would never end up in a practical political process with this one sentence. But, you would end up with a ton of what we call recycles that take into account this and take into account of that and looking at the CO2 exposure of the environment and looking at the status of one-legged immigrants from Kosovo and stuff like that. And then you might have this and that. And that completely dilutes the message.

It is unfortunately not the political system that we have to get this out. It is indeed also a quite risky thing because and imagine that when we had written Mika in these nine months that we wrote the technical proposal, one very big crypto platform that you all know would have imploded. And that was a massive risk. We all thought that FTX was an issue of Terra Luna, this this peanut stuff of thing. But imagine one of the big ones would have cracked, and at the time that was a real danger.

Can you imagine what the European Council would have said on crypto? You would all have been dead immediately. And this is the nature of the political process. This is the nature of when we are sitting in the committee, for example, on anti-money laundering, and there has been a terrorist attack like at the times I was at the committee in Brussels and Paris. Then they sit together over lunch and they say that we have to strengthen the rules.

And we are sitting in the committee and saying, "What the are we to strengthen?" The rules are there. It's just that people don't use the rules. It's just that people don't cooperate. And so, if it was just by way of sense to get a directive, I would propose it tomorrow.

But I can give you a guarantee that it does not get through the political process that we have. So, maybe a directive is a little bit ambitious, but it would be nice if politics would take a stand a little bit more to protect innovation and the developers. Completely agree. And that is up to you guys. I mean, you all have a member of parliament in your constituency.

You all know these people. Talk to them individually. I do. Go to these people. Explain to them also the effect on that and get them make statements.

That's precisely what we want. That's precisely what we will collect with this initiative and go on the media. But we cannot do that alone. So, we need all of you to go on the nerves of your elected representatives and make them have statements. Thank you.

Thank you so much. Is there any question you would like to You can They're behind you if you want to have a look. There's just too many, and there's really many good ones. We're outside, so please ask your questions. that.

It's lunchtime. Thank you so much. Round of applause.