US Treasury Bans Tornado Cash Mixer For Role In Crypto Money Laundering

The US Treasury Department has added crypto mixer Tornado Cash to a list of sanctioned organizations, banning all US citizens from interacting with it and requiring US assets owned by Tornado Cash to be reported to the Office of Foreign Assets Control .

The announcement was made Monday morning by the Treasury in a press release citing Tornado Cash’s role in laundering cryptocurrency stolen in major hacks, particularly those linked to North Korean hacking groups. In March, $625 million was stolen from the blockchain behind the Axie Infinite crypto gambling and laundered via Tornado Cash – a heist the FBI has attributed to the North Korea-based Lazarus Group.

The Treasury’s dramatic move is the latest escalation in a series of enforcement actions against Tornado Cash and other crypto mixers, which help hide cryptocurrency transactions by pooling funds and then redistributing them to contributors. In a statement, Brian E. Nelson, Under Secretary of the Treasury for Terrorism and Financial Intelligence, said the blender had failed to take adequate steps to prevent its services from being used by some of the most prolific cybercriminals. .

“Today, the Treasury sanctions Tornado Cash, a virtual currency mixer that launders the proceeds of cybercrimes, including those committed against victims in the United States,” Nelson said. “Despite public assurances to the contrary, Tornado Cash has repeatedly failed to impose effective controls designed to prevent it from routinely laundering funds to malicious cyber actors and without basic measures to address its risks.”

“Treasury will continue to aggressively pursue actions against mixers who launder virtual currency for criminals and those who assist them,” Nelson said.

Tornado Cash is now the second cryptocurrency mixer to find itself effectively cut off from the US financial system. In May, Treasury added to its sanctions list, also citing use of Blender by North Korean hacking groups as well as global ransomware gangs like Conti and Trickbot.

While there are legitimate privacy-focused uses for cryptocurrency mixers, tools like Tornado Cash and Blender undoubtedly play a pivotal role in helping organized crime gangs launder the proceeds of crime in ways that cannot be traced by standard blockchain tracking techniques. In January 2022, blockchain analytics firm Chainalysis reported that the use of crypto mixers had reached an all-time high, with year-over-year increases driven primarily by inbound transactions from cryptocurrency addresses. portfolio related to cybercrime.

In a possible attempt to evade regulation, Tornado Cash was set up as a decentralized financial product, which means that the software code that runs the service is distributed on the Ethereum network rather than running on servers based in a particular country. However, the Treasury sanctions list entry for Tornado Cash targets the mixer by specifying a number of Ethereum addresses linked to it, prohibiting US entities of any kind from transacting with those addresses.

While the Tornado Cash sanctions are a stern rebuke from the Treasury Department, the accompanying press release appears to leave the door open for a change in policy if the mixer operates more in line with guidelines issued by regulators.

“The ultimate goal of sanctions is not to punish, but to bring about positive behavioral change,” the statement concluded.