Tornado Cash Sanction : All you need to know
Tornado Cash is now illegal in the United States — here are the main points that you should know
On Aug 8th, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) imposed sanctions on Tornado Cash — a popular cryptocurrency “mixer” service that makes cryptocurrencies more anonymized and difficult to track. Through this sanction, all Americans and local entities are prohibited from interacting with Tornado Cash or Ethereum (ETH) wallets linked to the protocol — there may be fines of up to $330,000 and up to 30 years in prison for using Tornado Cash.
The reason for this kind of sanction is that Tornado continues to be used to launder illicit funds from cybercriminal and terrorist groups. According to OFAC, Tornado Cash has processed $7 billion worth of cryptocurrencies since its launch in 2019 — it has been used to launder more than $96 million from the Harmony Bridge Heist, and $7.8 million in the Nomad Heist that took place on August 2, 2022. North Korea’s Lazarus Group is also known to have laundered Tornado Cash after stealing $1.7 billion from several cryptocurrency exchanges.
What is Tornado cash?
Tornado Cash is a cryptocurrency mixer service launched in 2019 that is based on Ethereum and collects Ethereum cryptocurrencies from multiple platforms and then mixes them (mixer) to obscure the source. It allows users to send tokens to the service to be “mixed” with other users’ tokens before being sent back, which allows the whole process to be anonymous as a result. Like most decentralized protocols, Tornado Cash (TORN) is an open-source solution — originating from the ZCASH privacy coin. It is a protocol that targets a niche of users who value online privacy.
So What?
Unlike when OFAC sanctioned Blender.io (another mixer) last May, Tornado doesn’t exactly have a business to shut down. Tornado Cash is not a company or a human, it is an open-source smart contract-based decentralized project — decisions are made by pre-written codes that are deployed in its intended environment, making it rather difficult to classify Tornado Cash as a discrete entity or service.
Also, the because the codes are open-source and freely open to the public, it can be redeployed under a different name, utilizing different addresses — allowing infinite replication such as Tornado Cash B, Tornado Cash C. So, the question we all should ask here is this: is it really possible to sanction an open-source protocol that can be re-utilized?
The sanction also raised tension and major discussions regarding the preservation of privacy — many people in the crypto scene is calling this decision an attack on privacy, and clam that Tornado can be used for privacy purposes. A prime example is Vitalik Buterin, who made donations to Ukraine via Tornado Cash to protect the recipient, not himself.
Privacy is critical for a functional and safe society. Arguments that privacy is only for illegal activity are absurd/dangerous and reminds me of the people that want to make encryption illegal.
— Uniswap founder Hayden Adams
Like the period when the Web first came out, Tornado Cash has numerous pros and cons that raises controversy — we are currently witnessing the struggle between a centralized authority(OFAC) and a decentralized protocol(Tornado Cash), and it’s interesting to see how it all ends up in the end.
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