U.S. Treasury Sanctions Ethereum Mixing Tool Tornado Cash

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“Tornado Cash has repeatedly failed to impose effective controls designed to stop it from laundering funds for malicious cyber actors,” a statement from the Treasury said. 

Treasury Sanctions Tornado Cash 

The U.S. Treasury Department has banned Tornado Cash. 

The government agency’s Office of Foreign Assets Control added the popular Ethereum mixing tool to its sanctioned list Monday. A post on the Treasury’s website confirms that the protocol’s website and its associated smart contracts are now blocked. 

In a press release, Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson said:

“Today, Treasury is sanctioning Tornado Cash, a virtual currency mixer that launders the proceeds of cybercrimes, including those committed against victims in the United States. Despite public assurances otherwise, 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. Treasury will continue to aggressively pursue actions against mixers that launder virtual currency for criminals and those who assist them.”

The press release also claimed that the protocol had been used “to launder more than $7 billion worth of virtual currency since its creation in 2019.” According to Dune data compiled by @poma, Tornado Cash has seen $7.6 billion in lifetime volume, suggesting that the Treasury may be classifying all previous transactions as attempts to “launder” funds.

“DPRK State-Sponsored Hacking Group”

Secretary of State Anthony Blinken also posted an update on the ban on Twitter, including the dubious claim that Tornado Cash was a “DPRK state-sponsored hacking group.” He added that the government would “continue to aggressively pursue actions against currency mixers laundering virtual currency for criminals.”

Tornado Cash is a popular application that lets Ethereum users obfuscate transactions to preserve their privacy. It lets users deposit their assets to smart contracts and then withdraw them from a new address to make their on-chain activity harder to follow. Tornado Cash has become a pillar of the Ethereum ecosystem for many users, but it’s also gained notoriety due to its popularity among hackers. Whenever a DeFi hack occurs on Ethereum, the thieves tend to use Tornado Cash to cover their tracks and make off with the stolen funds. Over $1 billion of illicit funds has been funneled through the protocol over the past year, including a portion of the $550 million stolen in the record-breaking attack on Axie Infinity’s Ronin bridge in March.

Tornado Cash sparked controversy in the community in April when it announced that it had started using Chainalysis oracle to block addresses that had been sanctioned by OFAC. “Maintaining financial privacy is essential to preserving our freedom, however, it should not come at the cost of non-compliance,” Tornado Cash said at the time, raising questions about its degree of decentralization.

OFAC has issued several crypto-related sanctions in the past, but this one is notable in that it targets a protocol rather than just a website frontend. The list of blocked addresses includes the proxy address, the 10 ETH deposit contract, the 100 ETH deposit contract, and the 100 DAI deposit contract, among others.

Tornado Cash has not yet publicly commented on the development. Crypto Briefing reached out to the team but had not received a response at press time.

This story is developing and will be updated as further details emerge. 

Disclosure: At the time of writing, the author of this piece owned ETH and several other cryptocurrencies. 

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