Cryptocurrency Mixing Service Tornado Cash Blacklisted by Treasury Department

The US Department of Treasury sanctioned popular cryptocurrency mixer Tornado Cash on Mondaybarring Americans from using a service the government says “launders the proceeds of cybercrime.”

“Despite public assurances to the contrary, Tornado Cash has repeatedly failed to impose effective controls designed to prevent it from laundering funds for malicious cyber actors on a regular basis and without basic measures to address its risks,” Under Secretary of the Treasury for Terrorism and Intelligence Financial. Brian Nelson said in a statement.

Crypto asset mixers are designed to hide the traces of funds by combining someone’s tokens with a pool of other people’s assets on the platform. They go beyond traditional crypto platforms by further hiding the identity of the people involved in the transactions.

While some people use Tornado Cash as a legitimate way to protect their privacy, the government says it encourages illicit activity, including “facilitating heists, ransomware schemes, fraud, and other cybercrimes.”

“Virtual currency mixers that aid criminals are a threat to the national security of the United States,” the Treasury Department said.

The Tornado Cash website is displayed on the screen of a laptop and smartphone in London, Tuesday, March 15, 2022.

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Tornado was used in some high-profile crypto heists this year, including the $615 million in Ronin token theft, a network backing the non-fungible token game Axie Infinity, and a $100 million attack on US startup Harmony. Both were linked by security researchers with the Lazarus Group, a North Korean state-backed hacking group.

Blockchain analytics firm found elliptical at least $1.5 billion in proceeds from crimes like ransomware, hacking, and fraud have been laundered through Tornado Cash, and that the totality of the $100 million stolen from the Harmony Bridge in June was laundered through the service.

The US Treasury cited a much higher figure for Tornado Cash, saying it has been used to launder more than $7 billion worth of virtual currency since its launch in 2019. That figure refers to the total value of crypto assets. that have been sent through Tornado Cash. .

Some blockchain analytics tools have managed to “unmix” the cryptocurrencies sent through Tornado to identify the origin of the funds. Elliptic says it was able to trace stolen Harmony crypto to several new ether wallets, for example.

The actions against Tornado Cash follow sanctions similarly imposed in May 2022 on another popular service,

“The United States will continue to crack down on mixers who launder virtual currency for criminals and those who assist them,” Secretary of State Antony J. Blinken said in a statement. statement on Monday.

The Office of Foreign Assets Control (OFAC), a watchdog that falls under the control of the Treasury, has added Tornado Cash and its associated crypto wallet addresses to its “List of Specially Designated NationalsAnyone who interacts with these wallet addresses could now face criminal penalties, a cause for concern for some cryptocurrency holders with honest intentions.

“All transactions conducted by United States persons or within (or in transit) of the United States involving any property or interest in property of designated or otherwise blocked persons are prohibited unless authorized by a general or specific license issued by OFAC, or exempt,” the Treasury Department said. said.

However, enforcing such a move may be difficult for the government and too restrictive, according to Coin Center, a non-profit organization focused on crypto regulation. That’s because there is no single person or entity behind the use of Tornado Cash, an open source tool.

The action appears to be the “authorization of a tool that is neutral in character and can be used for good or bad uses like any other technology.” Coin Center wrote.

— CNBC’s Dan Mangan and Dawn Kopecki contributed to this report.

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