Kevin Helms
A student of Austrian economics, Kevin found Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open source systems, network effects and the intersection of finance and cryptography.
US Treasury Clarifies How To Comply With Regulations On Sanctioned Crypto Mixing Service Tornado Cash – Regulation Bitcoin News
The US Treasury Department has responded to some regulatory compliance questions related to Tornado Cash, a recently sanctioned crypto mixer. Answers include how to withdraw crypto or complete transactions initiated using Tornado Cash prior to the sanction and how to deal with “dust lingering” transactions.
The Treasury Department publishes FAQs about Tornado Cash
The US Treasury Department on Tuesday answered some frequently asked questions about the sanctioned cryptocurrency mixing service Tornado Cash.
On August 8, the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned the Ethereum-based mixer and prohibited US persons from “engaging in any transaction with Tornado Cash or its blocked property or interests in property.”
One of the questions concerns how to carry out transactions involving Tornado Cash that were initiated before the sanction. In order to complete the transactions or withdraw cryptocurrency without violating US sanctions regulations, the Treasury Department explained:
US persons or persons conducting transactions within US jurisdiction may request a specific license from OFAC to engage in transactions involving the applicable virtual currency.
“U.S. persons should be prepared to provide, at a minimum, all relevant information regarding these transactions with Tornado Cash, including the sender and recipient wallet addresses, transaction hashes, date and time of the transaction(s), and the amount(s) of virtual currency,” the Treasury added.
Another question relates to reporting obligations for “dusting” transactions. Treasury noted that OFAC is aware that “certain U.S. persons may have received unsolicited and nominal amounts of virtual currency or other virtual assets from Tornado Cash, a practice commonly referred to as ‘dusting’.”
While warning that “Technically, OFAC’s regulations will apply to these transactions,” the Treasury Department explained that if these dust transactions have no sanctions other than Tornado Cash:
OFAC will not prioritize enforcement against late receipt of initial block reports and subsequent annual block property reports from such US persons.
Treasury emphasized that “U.S. persons are prohibited from engaging in transactions involving Tornado Cash, including through the virtual currency wallet addresses that OFAC has identified.” However, the authority specified:
Interacting with open source code itself, in a way that does not involve a prohibited transaction with Tornado Cash, is not prohibited.
Attorney Jake Chervinsky shared their thoughts about OFAC’s clarification in a series of tweets. He noted that the FAQs “do not fully address the security harm caused by the designation.” Commenting on OFAC requiring “each person to submit their own individual license request,” Chervinsky said, “It shouldn’t be necessary: U.S. persons should not have to ‘apply’ for their own money.
As for dusting, he said since victims are required to file initial block reports and subsequent annual reports, “Enforcement remains on the table if those reports are delayed.” The lawyer emphasized:
De-prioritizing prosecution is not enough: OFAC should not consider prosecuting victims at all.
Following the Tornado Cash sanction, the Coin Center, a non-profit organization focused on policy issues facing cryptocurrencies, said OFAC exceeded its statutory authority.
What do you think of the Treasury’s clarification regarding the mixing service Tornado Cash? Let us know in the comments section below.
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