Updated on 2022-11-11: Tornado Cash sanctions

The US Treasury Department has updated its sanctions against the Tornado Cash cryptocurrency mixing service and has formally tied it to entities linked to North Korea’s nuclear weapons program. The Treasury initially sanctioned Tornado Cash in August for its central role in laundering funds stolen by North Korean hackers from multiple cryptocurrency platforms. A conglomerate of cryptocurrency platforms sued the Treasury for its sanctions, and this week’s update looks like a step the Treasury is taking to defend its initial sanctions in court by releasing more information about how the platform was used by North Korean entities. Read more:

• Treasury Designates DPRK Weapons Representatives
• U.S. Treasury Sanctions Notorious Virtual Currency Mixer Tornado Cash
• Coin Center files lawsuit against US Treasury over Tornado Cash sanctions

Updated on 2022-11-09

The U.S. Treasury Department reissued sanctions on Tornado Cash, accusing the crypto mixer platform of helping North Korean state-sponsored hackers launder over $455 million stolen in March. Read more: US reissues sanctions on Tornado Cash, tying it to North Korea’s nuclear weapons program

Updated on September 2022

Tornado Cash saga left a void, says Chainalysis chief scientist: Finance Redefined

A chief scientist at Chainalysis has said that the sanctioning of cryptocurrency Mixer Tornado Cash has left a vacuum for illicit fund mixing services. In its place, lesser used “junior mixers” are now vying for the top mixer positioning. There is still limited usage of Tornado Cash since it was sanctioned, and it’ll take time before we’ll know the full impact. Read More: Tornado Cash left a void, time will tell what fills it — Chainalysis chief scientist

Crypto-Mixing Service Tornado Cash Code Is Back on GitHub

Since the U.S. Treasury Department’s Office of Foreign Assets (OFAC) last month banned Americans from using decentralised privacy service and crypto mixer Tornado Cash, GitHub and other platforms removed Tornado Cash from their sites in order to comply with the new U.S. regulation. However, since then, Ethereum developers, believing that computer code is protected speech under the First Amendment of the U.S. Constitution, called for platforms that host the Tornado Cash code to reverse their bans. This Thursday, code repositories for the Ethereum-based mixer Tornado Cash were relisted on GitHub. Read More: Crypto-Mixing Service Tornado Cash Code Is Back on GitHub

Coinbase is fighting back as the SEC closes in on Tornado Cash

Crypto exchange Coinbase has announced it is funding a lawsuit against the United States Treasury Department. The lawsuit was brought by six people to challenge the sanctions on crypto mixer Tornado Cash which was sanctioned by the Office of Foreign Assets Control (OFAC) back in August. The sanctioning of the mixer is controversial, as it has helped to launder over $7 billion of crypto since 2019 but also has several legal use cases, such as having been used to make safe donations to Ukraine. ‘Coinbase CEO Brian Armstrong said in a statement that Treasury went too far, taking “the unprecedented step of sanctioning an entire technology instead of specific individuals.” In addition to claiming the sanctions exceeded the department’s authority, Coinbase argued the measures remove privacy and security for crypto users; Harm innocent people; and Stifle innovation.’ Read more: Coinbase is fighting back as the SEC closes in on Tornado Cash

Is MakerDAO Overreacting?

The DAO behind one of the biggest stablecoins, DAI, is in the middle of a debate to de-peg from the US dollar in the wake of US Treasury sanctions against mixer Tornado cash. De-pegging would be a drastic move, negating the entire purpose of DAI. Many are calling this an overreaction. And anyone who understands sanctions knows divesting US assets, including USDC, is no guarantee of protection. Ultimately Maker’s collective decision and its consequences will have ramifications far beyond DAI itself. Read More: Rune Christensen Details How MakerDAO Is Navigating Tornado Cash Sanctions

Updated on August 2022

Crypto and Geopolitics- Tether won’t blacklist Wallets associated with Tornado Cash

Tether says “not so fast” to U.S. sanctions. Stablecoin operator Tether says it will not blacklist wallets associated with blender protocol Tornado cash unless it has clearer instructions from the U.S. Treasury Department. The bigger picture: Treasury’s power to blacklist entities and prohibit them from interacting with the U.S. banking system is designed to pressure adversaries. In the case of Tornado Cash, the concern was North Korea’s use of the protocol to hide $100s millions in stolen cash. This isn’t about crypto as much as it is geopolitics.

The Tornado fallout

On August 8, the US Treasury Department banned residents of the country from using decentralized crypto-mixing service Tornado Cash. Mixers like Tornado help enable anonymous transactions to protect user privacy.

Some believe the move is an honest attempt to rule out illicit actors who have laundered funds during major heists and question how much of Tornado Cash’s transactions are actually innocuous.

Others criticize the move for hurting the privacy of innocent users and setting a bad precedent by persecuting a mere developer of a software tool.

That said, most programmers aren’t building solutions that allow easy transfers that bypass the banking system (illicit or otherwise), so for the firm to expect no repercussions might be naive.

In any case, Tornado Cash is still up and running, and there’s nothing stopping copies from spinning up. One has to ask if the sanctions are even effective.

Alleged Tornado Cash developer arrested, crypto industry reacts

A 29-year-old man has been arrested in Amsterdam for his suspected involvement in writing the code as part of the development of crypto mixer Tornado Cash. The Netherlands’ Fiscal Information and Investigation Service which investigates financial crime in the country said the individual is “suspected of involvement in concealing criminal financial flows and facilitating money laundering,” and that “multiple arrests are not ruled out” as investigations into Tornado Cash continue. Tornado Cash was the crypto mixer banned earlier this month by the US Department of the Treasury for its role in laundering money from large-scale hacking operations. The problem is, there are many legitimate reasons for using crypto mixing services, with many pointing out they have used them to make it safer to donate to Ukraine. It isn’t clear yet if the individual has been arrested for just writing the code, or something more. Read More: Alleged Tornado Cash developer arrested in Amsterdam

US Treasury bans Tornado Cash mixer for role in crypto money laundering

The US Department of the Treasury has added crypto mixer Tornado Cash to a list of sanctioned organizations for its role in laundering crypto stolen in major hacks, especially those linked to North Korean hacking groups. This means all US citizens will be banned from interacting with the mixer and will require that US assets belonging to Tornado Cash be reported to the Office of Foreign Assets Control. Brian E. Nelson, under secretary of the Treasury for terrorism and financial intelligence, said Tornado Cash ‘had not taken adequate steps to prevent its services from being used by some of the most prolific cybercriminals’. He said of crypto mixers in general that “Treasury will continue to aggressively pursue actions against mixers that launder virtual currency for criminals and those who assist them”. Read More: US Treasury bans Tornado Cash mixer for role in crypto money laundering

Overview: Tornado Cash Sanctioned for Laundering Cybercrime Proceeds

The US Department of the Treasury’s Office of Foreign Assets Control (OFAC) has sanctioned Tornado Cash, a virtual currency mixer that has been used to launder billions of dollars in stolen virtual currency. The sanctions freeze company assets and prohibit US citizens from doing business with Tornado Cash without approval from OFAC.

Note

• If you are a legitimate business, not much chance you were using Tornado Cash – or using “crypto currency” at all, since actual use for business transactions is minimal. But US Treasury has a compliance guide that is worth reading if you are – home.treasury.gov: Sanctions Compliance Guidance for the Virtual Currency Industry (PDF)
• If you’re looking at accepting cryptocurrency, actions like this matter. Be sure you do your research, including getting input from peers on options and pitfalls. This is a case where you really need to be continuously monitoring your partners to ensure you’re not going to be on the wrong side of a regulatory decision. Make sure that you not only understand the relationships in play and how transactions are governed but also what the contingency plans are when something fails or becomes prohibited before jumping in with both feet.

Read more in

• US Treasury Sanctions Tornado Cash, Freezes Its Assets
• US sanctions crypto mixer Tornado Cash used by North Korean hackers
• US treasury whips up sanctions for crypto mixer Tornado Cash
• U.S. Treasury Sanctions Notorious Virtual Currency Mixer Tornado Cash

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