The U.S. Treasury Department has sanctioned the Ethereum coin mixing tool Tornado Cash. Americans won’t be allowed to interact with the mixer and will be required to report any asset on Tornado Cash to the Office of Foreign Assets Control (OFAC).
In a Monday press release, the body also placed forty-four USDC and ETH addresses linked with the tool on its list of Specially Designated Nationals. The department believes individuals and groups have laundered more than $7 billion worth of crypto using the mixer since 2019, including a $625 million heist of Axie Infinity’s Ronin Network by North-Korean-based Lazarus Group.
Tornado Cash, which makes transactions private by pooling them together, has been at the forefront of several recent hacks, including a $375-million Wormhole attack in February and a $100-million Horizon Bridge breach in June.
“Despite public assurances otherwise, Tornado Cash has repeatedly failed to impose effective controls designed to stop it from laundering funds for malicious cyber actors on a regular basis and without basic measures to address its risks,”
stated Brian Nelson, Under Secretary of the Treasury for Terrorism and Financial Intelligence.
“Treasury will continue to aggressively pursue actions against mixers that launder virtual currency for criminals and those who assist them.”
In May, the treasury had also sanctioned another crypto mixer blender.io, involved in processing about $20 million worth of transactions in the Ronin Network attack.
Tornado Cash had announced in June that it had implemented a fully open-source code as part of its goal to move toward decentralization and transparency.
Following the announcement, Roman Semenov – founder of Tornado Cash – reported that his Github account was suspended.
My @GitHub account was just suspended ?
— Roman Semenov ?️ ?? (@semenov_roman_) August 8, 2022
Is writing an open source code illegal now?
Others have expressed their displeasure over the development. Erik Voorhees, a reputed crypto investor, has mocked the decision on Twitter.
I'm sure the bad guys will stop using Tornado Cash because it's "illegal"
— Erik Voorhees (@ErikVoorhees) August 8, 2022
Just like they don't use illegal weapons, smuggle illegal drugs, or illegally launder money through every means they can find.
Law abiding Americans are the only ones hurt by this.
Matthew Green, Professor of Cryptography at Johns Hopkin, condemned the announcement.
For the record, I am not in favor of North Korea laundering stolen money. But I’m also not in favor of governments stepping in and smashing every service that lets users shield their transaction history from *being read by the whole world.* I’m sure there is a better way forward.
— Matthew Green (@matthew_d_green) August 8, 2022
The OFAC insists that sanctions aim not to punish but to encourage positive behavioral changes.