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In the midst of a flurry of lawsuits against the Treasury for its actions, Tornado Cash, the Ethereum coin mixer sanctioned by the U.S. Treasury in August, has returned to the software hosting website GitHub.
After the U.S. imposes sanctions on Tornado Cash, what is the outlook for cryptocurrency mixers? In August, the Tornado Cash crypto mixer was subjected to sanctions by the Office of Foreign Assets Control (OFAC) of the United States Treasury.
This is based on claims that the mixer has handled more than $7 billion in cryptocurrency since its inception in 2019, including from criminal organizations like the Lazarus Group, which is backed by the North Korean government.
The Treasury will continue to vigorously pursue actions against mixers
In announcing the sanctions, Treasury Under Secretary Brian E. Nelson stated that despite public assurances otherwise, Tornado Cash has repeatedly failed to impose effective controls designed to stop it from laundering funds.
The Treasury will continue to vigorously pursue actions against mixers and others who assist criminals in laundering virtual currency.
She said at the Forkast live-streamed event “Crypto Rising:” This is a departure from the principle that code or technology itself has fundamental neutrality that is benign, and it is what you do with it that is what turns it into something that can be malicious.
The case brought by six Tornado Cash users and supported by the cryptocurrency exchange company Coinbase Global, Inc. may provide U.S. regulators with important precedents.
Crypto mixer proponents argue that because they conceal the history and origin of digital assets, they are essential to privacy on the blockchain.
More privacy is ensured by the capability to move cryptocurrency into a wallet that has never been used or associated with the user.
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Tornado Cash’s Market Cap is down by 4.30% over the past 24 hours
Legal and blockchain experts say that although the absence of crypto mixers would have little effect on legal cryptocurrency activity, they pose a problem for regulators and the cryptocurrency community.
In an email to Forkast, Andrew Fierman, head of Sanctions Strategy at Chainalysis, a U.S. blockchain analysis firm, stated, Virtually everyone would acknowledge that privacy is valuable and that in a vacuum, there are no reason services like mixers shouldn’t be able to provide it.
However, this needs to be balanced with the fact that 25% of mixed funds come from illicit addresses.
According to Chainalysis data, a sizable portion of the more than $7.6 billion worth of Ether cryptocurrency that Tornado Cash has received since its launch in August 2019 has come from illicit or high-risk sources, including $455 million from Lazarus Group hacks.
According to Chainalysis data, which did not provide a dollar figure, cryptocurrency addresses associated with illegal activity transferred nearly 10% of their funds to cryptocurrency mixers like Tornado Cash in the first half of 2022.
However, Ethereum cofounder Vitalik Buterin has stated that he used Tornado Cash to make a donation to Ukraine following Russia’s invasion, claiming that the service allowed him to do so without disclosing the identities of the recipients. This raises concerns regarding the issue of privacy and security.
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