US Government Prohibits American Citizens from Interacting with Tornado Cash 11

US Government Prohibits American Citizens from Interacting with Tornado Cash

TLDR:

  • The U.S. sanctioned Tornado Cash, the mixing token that makes Ethereum transactions untraceable. 
  • The U.S. Treasury’s Office of Foreign Asset Control posted the updated sanctions list. 
  • The order makes it illegal for U.S. citizens to use Tornado Cash. 
  • Tornado Cash is open source, and many believe the sanctions deny Americans their “constitutional right to anonymity.”

Tornado cash has just today been sanctioned by the U.S. Government, a move which would presumably prohibit any address that interacted with it. This is not the first time the U.S. Treasury’s Office of Foreign Asset Control (OFAC) targeted crypto mixers after sanctioning Bitcoin Mixer Blender back in May. 

According to Senior Crypto Analyst Dylan LeClair, CirclePay’s USDC has officially blacklisted every Ethereum address sanctioned by the U.S. Treasury.

According to OFAC, the virtual currency mixer Tornado Cash has been used to launder around $7 billion of virtual currency since its creation in 2019. The U.S. claims that Tornado Cash is a haven for malicious cyber activities in Northern Korea and other criminal groups.

“Today, for the first time, Treasury is sanctioning a virtual currency mixer,” said Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson in the press release.

“Virtual currency mixers that assist illicit transactions threaten U.S. national security interests. We are taking action against illicit financial activity by the DPRK and will not allow state-sponsored thievery and its money-laundering enablers to go unanswered.”

Blender and Tornado Cash have been linked to Lazarus Group, a cyber hacking group that has carried the largest virtual currency hacks to date. Its victims were Axie Infinity, from which almost $620 million were stolen, and around $20.5 million was used on Blender to launder the illicit proceeds.

According to data from blockchain firm Nansen, Ethereum transactions spiked after Axie Infinity’s hack last year.

US Government Prohibits American Citizens from Interacting with Tornado Cash 12

Crypto advocates are not happy with the move. Jerry Brito, executive director of Coin Center, told Fortune that the sanction denies Americans “their constitutional right to anonymity.” According to Brito, anyone who interacts with addresses could be in violation, even if they received funds from Tornado Cash without their consent. He believes that because the fund is open source, nothing stops a money launderer from tweaking the code and creating a fork of the chain. 

The U.S Treasury Department official said on a press call that they would continue monitoring mixers and would immediately take action when required.