US Treasury sanctions crypto ‘mixer’ Tornado Cash
The US has sanctioned Tornado Cash, a so-called commingling service that allows users to make their Ethereum transactions virtually untraceable, and which the US claims is a haven for North Korean hackers and other criminals to launder money.
Today’s update to the sanctions list marks the second time the US Treasury’s Office of Foreign Asset Control (OFAC) has sanctioned a crypto mixer after it added Bitcoin mixer Blender in May.
The new order makes it illegal for US citizens to use Tornado Cash, but the language of the order – issued by the US Treasury’s Office of Foreign Asset Control (OFAC) – has also raised eyebrows as it appears to prevent Americans from using a whole . of open source.
Mixers, also known as tumblers, mix together cryptocurrencies from many different people, secretly record how much each person wants to send to someone else, and then spit out the crypto randomly until the recipients receive the intended amounts.
The idea is that the recipients will receive the right amount of, say, ETH, but they won’t same ETH. The blenders act as a black box that breaks the bond between the two accounts, so it’s hard to figure out where the money came from.
Both Blender and Tornado Cash were popular with Lazarus, the North Korean state-backed hacker group behind the 2017 WannaCry ransomware campaign and March’s $620 million bridge hack of the popular web3 monster fighting game, Axie Infinity.
In May, Tornado Cash banned cryptocurrency addresses that OFAC had linked to Lazarus. But it banned only the addresses from the site, not smart contracts, which cannot be updated. OFAC said this was not good enough and banned Tornado Cash outright, as well as the website.
The mixer “failed repeatedly to impose effective controls designed to stop [criminals] from money laundering,” Treasury Secretary Brian Nelson said in a statement.
A researcher from cryptanalysis firm Nansem tweeted that the sanctioned addresses included “each [Tornado Cash] related wallet they could find,” including an address it used to receive Gitcoin grants.
Crypto advocates are against this. Jerry Brito, CEO of crypto non-profit Coin Center, told Fortune the sanction denies Americans their “constitutional right to anonymity.” Brito added that the order raises difficult questions about enforcement.
“Presumably that means anyone interacting with those addresses … would be in a technical violation,” even if they only received a few dollars from a Tornado Cash mixer without their consent. “It is difficult”.
And because the code for Tornado Cash is open source, there is nothing to prevent an upstart launderer from tweaking the code and re-releasing it under a new name. “It will happen without a doubt,” Brito said. “I imagine there will be some lag in liquidity.”
The US Treasury Department seems committed to chasing these forks down. “Treasury will continue to aggressively pursue actions against mixers who launder virtual currency for criminals and those who assist them,” Nelson said in the press release.
This story was originally featured on Fortune.com
