In a notice made on Monday, the US Treasury Department placed the Tornado Cash website and a huge variety of Ethereum addresses on its Specially Designated Nationals list, prohibiting American citizens from utilizing the service or doing transactions with these addresses.
What is Tornado Cash?
Tornado Cash is an Ethereum network “mixer.” It enables Ethereum users to transmit ether (ETH) or ERC-20 tokens to the service to be “mixed” with tokens from other users before being returned, obscuring who gave what to whom and when. While Ethereum’s default privacy measures are almost nonexistent, Tornado Cash seems to be extremely effective; if it weren’t, OFAC may not have bothered to ban it.
Due to the code’s transparency, decentralization, and automation, Tornado Cash can be relied upon to perform as advertised.
OFAC has several valid reasons to desire Tornado Cash would not exist. According to the CIA, the Lazarus Group of North Korea utilized Tornado to launder hundreds of millions of dollars from the hacking of major crypto projects, like the Ronin bridge. It has been hypothesized that North Korea utilizes the money from these hacks to support its weapons development; hence, preventing them would likely benefit the global community.
But OFAC’s sanction is an indiscriminate dirty bomb of catastrophic proportions, set to obliterate the basic human rights of millions of people worldwide while (perhaps) halting the operations of one small and destitute country. There are many reasons why non-criminals may utilize a service like Tornado Cash, including making anonymous political contributions and hiding the quantity or whereabouts of their own fortune.
Even Ethereum co-founder Vitalik Buterin chimed in to reveal he had utilized Tornado Cash to disguise payments to the Ukraine war effort — not, he maintains, to protect himself, but rather to protect the Ukrainian beneficiaries.
The Treasury Department’s notice included a list of Ethereum addresses associated with the Tornado Cash network, including donation addresses. According to Andrew Thurman, a researcher at Nansen, the list of prohibited addresses includes one account that received payments from Gitcoin, an Ethereum-based platform for sponsoring open-source projects.
The Treasury Department said that it adopted these actions because criminals had laundered money using Tornado Cash. “Today, the Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury sanctioned virtual currency mixer Tornado Cash, which has been used to launder more than $7 billion worth of virtual currency since its formation in 2019,” said the statement.
After breaching Harmony Bridge in June, Lazarus Outfit, a hacker group supported by the North Korean government, utilized Tornado Cash to launder approximately $96 million, according to the revelation.
It was also revealed that crooks utilized Tornado Cash to launder $7.8 million stolen during the Nomad Bridge attack last week.
Tornado Cash said in April that it used technology from the blockchain monitoring company Chainalysis to prohibit U.S. government-sanctioned addresses from utilizing the privacy app.
Evidently, this was not satisfactory to U.S. officials. Brian E. Nelson, Under Secretary of the Treasury for Terrorism and Financial Intelligence, added, “Despite public assurances to the contrary, Tornado Cash has repeatedly failed to implement effective controls designed to prevent it from laundering funds for malicious cyber actors on a regular basis and without basic measures to mitigate its risks.”
Ethereum is the network powering the second-largest cryptocurrency by market capitalization, and its blockchain is home to thousands of tokens. Its native token, ETH, is now trading for just less than $1,800 and has a market capitalization of almost $219 billion.
© Cryptopress. For informational purposes only, not offered as advice of any kind.
