Last year, in August, the Office of Foreign Assets Control (OFAC) launched sanctions against Tornado Cash. The US regulator had indicated that the crypto mixer was involved in money laundering cases. Tornado Cash would therefore have to suspend all activity. But Chainalysis reveals that things didn’t quite go as planned.
Tornado Cash crypto mixer cannot be unplugged!
Tornado Cash developer Alexey Pertsev was indicted in August for cryptocurrency laundering. The crypto mixer he created was allegedly used to fund North Korean hackers. Upon developer indictment, Tornado Cash was ordered to cease all activity. It is true that then it became difficult to access the platform. But Chainalysis revealed in a chirp this January 9 that the crypto mixer remained functional.
The blockchain analytics firm said: “Tornado Cash’s activity has dropped significantly since the sanctions, but the platform hasn’t stopped working altogether. Tornado Cash works with smart contracts that can’t be taken offline, so nothing but the legal consequences of sanctions violations stop anyone from using it“.
The sanctions imposed therefore had a noticeable effect on the mixer, but not in the way the authorities would have liked. It seems that they mainly managed to train a 68% drop in total funding on Tornado Cash. This decline was observed within 30 days of the OFAC sanctions taking effect.
Sanctions hit centralized platforms the most
According to Chainalysis, while no one can easily unplug Tornado Cash, it is quite the opposite with centralized services. For example, the Hydra darknet market completely ceased to function following the intervention of the German authorities. In fact, crypto revenues became zero once the servers of this centralized service were seized.
Chainalysis explained: “This suggests that sanctions against decentralized services act more as a tool to discourage use of the service rather than suspending its use altogether.“.
In addition to the Chainalysis report, another report, by blockchain security firm SlowMist, reveals an interesting fact. Indeed, 1,233,129 ETH worth $1.62 billion was sent to Tornado Cash in 2022. At the same time, 1,283,186 ETH, or $1.7 billion, was withdrawn from the crypto mixer.
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Far from dampening my enthusiasm, a failed investment in a cryptocurrency in 2017 only increased my enthusiasm. I therefore decided to study and understand the blockchain and its multiple uses and to convey information related to this ecosystem with my pen.