The United States Treasury’s Office of Foreign Assets Control (OFAC) has sanctioned the Ethereum-based virtual currency mixer Tornado Cash and is blacklisting any Ethereum address that interacts with the Tornado Cash mixing service.
“Today, Treasury is sanctioning Tornado Cash, a virtual currency mixer that launders the proceeds of cybercrimes, including those committed against victims in the United States,” said Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson.
“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. Treasury will continue to aggressively pursue actions against mixers that launder virtual currency for criminals and those who assist them,” he added.
Tornado Cash is a digital currency mixer that obfuscates transaction history by combining ETH deposits from many users into one pool before paying out Ethereum withdrawals so that it’s not possible to identify which user(s) the funds originated from.
OFAC says that $7 billion has been laundered via Tornado Cash since 2019, that it is a tool known to be used by a North Korean government-sponsored hacking group, and that most recently, it has been used in DeFi Bridge exploits to launder upwards of $100 million.
OFAC believes mixers are a threat to U.S. national security and a tool used to facilitate heists, ransomware schemes, fraud, and other cybercrimes. Many people agree and believe that there is no reason to hide your tracks by using a digital currency mixing service unless you are committing some kind of crime.
But how will it work?
What I'm also curious about is what happens when you send tornado washed ETH to random public ENS. Do you just fuck them forever?
— Larry Cermak (@lawmaster) August 8, 2022
It’s not clear how blacklisting Ethereum addresses that interact with Tornado Cash will work and if it will be effective. Many people on Twitter have been pointing out that one address can send ETH to the Tornado Cash mixer and have it withdrawn to an address they don’t own—or an address of someone they do not like—so that the recipient of the Tornado Cash-tainted ETH gets blacklisted.
if you know someone you hate's Coinbase wallet can just send them tornado'ed ETH now so they are screwed
not a financial advice pls conduct with caution
— Dovey📍HK & ETHTokyo (@DoveyWan) August 8, 2022
Regardless, OFAC has begun earmarking addresses that have had significant interactions with Tornado Cash, and it is expected that OFAC will continue to add addresses to their Specially Designated Nationals list, the list of individuals and groups that have been singled out because they have violated sanctions, as time goes on.
Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups from BitMEX to Binance, Bitcoin.com, Blockstream, ShapeShift, Coinbase, Ripple,
Ethereum, FTX and Tether—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.
New to blockchain? Check out CoinGeek’s Blockchain for Beginners section, the ultimate resource guide to learn more about blockchain technology.