How Crypto Companies Respond to Tornado Cash Sanctions

Tornado Cash was sanctioned during the second week of August. How have other companies reacted to the news?

This month, Ethereum coin mixer Tornado Cash was sanctioned and its developer was arrested. While this may or may not halt the development of the project, it has led to more third-party projects and companies complying with the new rules.

So far, the following cryptocurrency companies have responded to these incidents, either by taking action quietly or by issuing public statements.

Circle, which issues the USDC stablecoin, has blacklisted sanctioned Tornado Cash addresses and frozen $75,000 worth of USDC in the process.

Although Circle’s actions were initially noticed by the public, CEO Jeremy Allaire later confirmed in a blog post that the firm had indeed taken these actions.

Allaire noted that Circle’s commitment to complying with the law has compromised its “belief in the value of open source software and … the assumption and preservation of privacy.” He says Circle will soon announce steps to support more open policies.

Stablecoin project MakerDAO has also responded to the sanctions. Co-founder Rune Christensen recently tired that he had investigated the Tornado Cash sanctions and found that the implications are “more serious than [he] first thought.”

He added that MakerDAO should “seriously consider preparing to depreciate from the US dollar” and said this outcome is “almost inevitable.”

Maker’s DAI stablecoin is currently 50.1% backed by USDC, and Christensen has now proposed converting USDC in the project’s Peg Stability Module to ETH. Using USDC as backing is now a potential risk, given that USDC accounts are named in the Tornado Cash sanctions and given that Circle itself can block certain USDC transactions.

Two Ethereum API providers, Alchemy and ConsenSys’ Infura, are blocking requests from addresses that have used Tornado Cash. While not all users rely on these services, the effects could extend to other services such as ConsenSys’ Metamask wallet, which uses Infura as its preferred endpoint for RPC requests.

Neither API provider has provided a full statement. However, a ConsenSys executive told The Block on Aug. 9 that his company was “required to terminate” certain accounts and “suspend” [its] relative to Tornado.Cash” due to the sanctions.

GitHub has apparently deleted several pages related to Tornado Cash’s development, including project pages and developer accounts.

It is possible that some pages were deleted by the developers themselves, as GitHub has not said that they have taken action. However, at least one developer, Roman Semenov, have confirmed that his account was actually suspended by GitHub.

Tornado Cash’s website and Discord account have also gone offline. However, the disappeared GitHub pages have drawn more attention due to the fact that several accounts were deleted. It is unclear whether the project can or will return to GitHub.

NFT marketplace OpenSea appears to have suspended the accounts of users who have recently used Tornado Cash. An NFT gathering rang Mushroom believe that this is the reason why it has been removed from the stock exchange. An individual user, 0xtrollalso suspect that his recent Tornado activity may have led to his account being banned.

OpenSea has not stated whether they have specifically removed accounts linked to Tornado Cash. However, an OpenSea spokesperson said the firm “explicitly prohibits[s] sanctioned individuals, countries or services from using OpenSea.”

Crypto exchange dYdX said on August 10 that its compliance provider recently flagged several accounts that have connections to Tornado Cash.

It noted that many of these accounts never directly interacted with Tornado Cash, but that these accounts held “insignificant amounts” of funds that had once been associated with Tornado. It says it has made adjustments “within the limits of [its] compliance policies” and unbanned certain accounts.

Oasis, a popular decentralized finance (DeFi) program, has apparently decided to block addresses associated with Tornado Cash.

After Tornado Cash was sanctioned, users saw messages indicating that their addresses were associated with risk. On August 11th, an Oasis team member explained on Discord that Oasis updated the terms to comply with the regulations. He added that “sanctioned addresses will no longer have access to Oasis.app functionality.”

It seems that Oasis used the policy excessively in the beginning. Later, Oasis saw it some of these risk messages were “due to a technical issue that has now been resolved.” This means that some users have had their Oasis access restored.

It is likely that many other companies are quietly blocking Tornado Cash related transactions due to the fact that sanctions violations have severe penalties.

Furthermore, the sanctions against Tornado Cash are undoubtedly more extensive than usual. Many critics have noted that sanctions typically target individuals and organizations rather than neutral tools like Tornado Cash. This may encourage companies to stay away from the service.

However, Tornado Cash is still operational and it is possible for users to send transactions to any destination. Although corporate bans will likely make it more difficult to “cash out” funds associated with Tornado Cash, private transactions will likely continue.

In fact, at least one user has sent unsolicited Tornado transactions to publicly known cryptocurrency addresses in a “dusting” attack, proving that sanctions have not stopped Tornado Cash transactions in their entirety.

Read more: Tornado Cash has been sanctioned and one developer has been arrested