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  • Writer's pictureVeronica Irwin

The Treasury Department sanctioned cryptocurrency mixer Tornado Cash

The agency says the protocol was used to launder over $7 billion in cryptocurrency since 2019.


8/8/2022

North Korean hackers used Tornado Cash, a mixer platform for cryptocurrencies, to launder funds. That's according to the U.S. Treasury Department, which imposed sanctions on the USDC and ETH wallet addresses associated with the protocol Monday.


Cryptocurrency mixers exist to make transactions more private. The protocols “mix” funds used for a transaction with large amounts of other funds, essentially scrambling the ledger. They do not utilize KYC principles, and the most complex use zero-knowledge proofs to erase any understandable ledger at all. According to the Cracow University of Economics, mixers process about a quarter of illicit bitcoin.

The U.K.’s National Crime Agency has called for increased regulation of cryptocurrency mixers. In a Senate Banking Committee hearing in March, Elizabeth Warren also grilled Chainalysis co-founder Jonathan Levin about whether mixers might help Russian oligarchs avoid sanctions. Levin said at the time that Chainalysis had tracked multiple illicit transactions, despite mixers, that led to arrests.


The Treasury Department said that Tornado Cash, however, did not utilize controls to prevent money laundering using the protocol. The Department said the platform had been used to launder more than $7 billion in cryptocurrency in the last three years, though private sector analysis cited by The Wall Street Journal says that number may be inflated.


“Mixers are basically an automated money-laundering service,” a senior official told The Journal.


The sanctions are the latest move by law enforcement under the Biden administration to reign in the use of crypto for illicit purposes. The president issued an executive order in March in an attempt to unify patchwork regulatory approaches, saying that he wanted to support the development of the industry while implementing adequate consumer protections and preventing illegal activity.


Protocol link: https://www.protocol.com/bulletins/treasury-department-tornado-sanction

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