Cryptocurrency mixer Tornado Cash has been sanctioned and blacklisted by the US treasury, prohibiting Americans from using its services.
Citing the mixer’s alleged role in money laundering and a $600 million hack by a North Korea state-sponsored group, the US Treasury’s Office of Foreign Assets Control (OFAC) has now also blacklisted wallets and individuals closely connected to Tornado Cash.
Tornado Cash is among the most notorious cryptocurrency mixers, intended to produce privacy for those engaging in cryptocurrency transactions, but also used for more illicit transactions.
Tornado Cash Banned in the US
In an August 8 announcement, the OFAC noted several uses of Tornado Cash. These included the Harmony Bridge hack, Nomad hack, Axie Infinity hack, to launder the stolen funds from these events.
Under Secretary of the Treasury for Terrorism and Financial Intelligence, Brian E. Nelson, said: “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.”
He also noted the US Treasury would “aggressively pursue” action against other mixers that are used for laundering cryptocurrency. OFAC already sanctioned another mixer, Blender.io, for its role in the hack back in May 2022.
The announcement specifically noted, “virtual currency mixers that assist criminals are a threat to US national security.”
US Secretary of State Antony Blinken tweeted about the sanctions. However, he mistakenly identified Tornado Cash as the Korean group behind these hacks. This has since been deleted and replaced with an updated tweet.
Cryptocurrency coin mixers obscure the origins and destinations of cryptocurrency sent in using transactions. As explained by Tornado Cash in its guide, it achieves privacy by “breaking the on-chain link between source and destination addresses”. It operates across a range of blockchains and Layer-2’s, including Ethereum, BNB, Polygon, and Avalanche.
Going into the implications on cryptocurrency users, the OFAC said all transactions by US persons involving Tornado Cash are prohibited. The Treasury has also blocked nearly 50 individual Ethereum wallet addresses, too.
Tornado Cash has yet to comment on the sanctions. Users on the various Tornado Cash community platforms have started to discuss its implications. While some were fearful of the implications, one user in its Telegram joked: “Congrats for the free massive advertising from [the] US Treasury.”