U.S. Government Bans Tornado Cash on the Grounds of National Security
The sanction list includes more than 40 wallet addresses tied to Tornado Cash.
U.S. Treasury sanctioned crypto mixer Tornado Cash
On August 8th, the U.S. Treasury Department issued a sanction against Ethereum-based coin mixer Tornado Cash. As a result, all Americans are banned from using the crypto mixer for illegal causes.
On Monday, the Office of Foreign Assets Control (OFAC) added Tornado Cash to its Specially Designated Nationals And Blocked Persons List (SDN). According to the department, criminals have been using the crypto mixer to launder more than $7 billion worth of crypto since its creation in 2019. It was also a key tool for Lazarus Group, a North Korean hacking group responsible for Ronin Network's $625 million heist, to process $455 million of stolen funds.
Since the Ronin hack in March, blockchain analytics firm Nansen observed a spike in Ether (ETH) deposits on Tornado Cash. Other analysts also found tens of millions of dollars worth of crypto stolen from Ronin flowed through the mixer. Besides that, another crypto mixer Blender.io, banned by U.S. Treasury in May, processed $20.5 million of funds pocketed from the same source.
"Tornado Cash has been the go-to mixer for cybercriminals looking to launder the proceeds of crime, as well as helping to enable hackers, including those currently under U.S. sanctions, to launder the proceeds of their cybercrimes by covering up the origin and transfer of this illicit virtual currency," said a senior official from the U.S. Treasury department.
More than 40 addresses, including Tornado Cash's donation address, proxy address, a Gitcoin grants address, and a few more USDC addresses, were put on the OFAC sanctions list. Following the announcement, Circle blocked those sanctioned addresses, freezing more than $75,000 worth of USDC. Github then suspended accounts of Tornado cash contributors, including an account that belonged to Tornado co-founder Roman Semenov. As of writing, the Tornado Cash website has gone offline.
Though the sanction is a very much-welcome move for the sake of national security, it's unclear how effective this will be in the long term. Earlier this year, Tornado Cash co-founder Roman Semenov told CoinDesk that they have designed the Tornado protocol to be "unstoppable". He too told Bloomberg News too that it would be "technically impossible" to impose sanctions on protocols like Tornado.