Tornado Cash, a cryptocurrency mixing protocol, is accused by the US Treasury of money laundering and facilitating malicious cyber activities. In all, the US Treasury accuses Tornado Cash of having laundered nearly $7 billion since 2019. As a result, restrictions are applied to them and the platform is blacklisted as cryptocurrency mixers, which prohibits Americans from to deal with them.
Tornado Cash banned in the United States
On August 8, 2022, the US Treasury Department added Tornado Cash to its sanctions list. This blacklist contains various addresses including that of the mixer’s Smart Contract, the address of its wallet dedicated to donations and its Gitcoin address. As a result of this accusation, Tornado Cash is the second blender on the list after Blender.io. As a result, all US citizens are prohibited from using their services.
The two main charges are money laundering and facilitating hacks and malicious cyber activities. For this second reason, the US Treasury maintains that the blender helped Lazarus, a North Korean hacker group, to launder nearly $455 million. This department also includes in this laundering the sums received after the hacks of Harmony Bridge and the Beanstalk project.
Sanctions applicable to a certain extent
Specifically, US citizens cannot deal with Tornado Cash addresses. To recognize them, the Ethereum addresses relating to the platform are listed on the list of Specially Designated Nationals or SDN. Note that this list contains the names of people and companies with which Americans cannot deal. Blocking the funds of people and companies on this blacklist thus becomes easier for the competent authorities.
Another concern in the application of the freezing of funds and other sanctions is the fact that there are not only illicit activities on this platform. In effect, there are users who make use classic cryptocurrencies on Tornado Cash but who just want to benefit from anonymity in their transactions. Indeed, mixers like Tornado Cash guarantee anonymity in blockchains by mixing the cryptos of several people before sending them back to anonymous addresses.
Tornado Cash is now blacklisted by crypto mixers in the United States. However, the financial sanctions have no real impact since the very structure of this decentralized protocol does not allow the application of sanctions. Nevertheless, the actions of the US government help limit abuse and prevent hackers from operating freely with impunity.
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