Tornado Cash operates despite sanctions
2023.01.10 03:33
Tornado Cash operates despite sanctions
By Ray Johnson
Budrigannews.com – A blockchain analytics company has disclosed that Tornado Cash, a decentralized cryptocurrency mixer, has been hampered by sanctions that have limited its use.
The crypto mixer was subjected to sanctions by the Office of Foreign Assets Control (OFAC) on August 8 for its alleged involvement in the laundering of criminal proceeds.
In a report that was released on January 9, Chainalysis stated that the sanctions did have some effect, with total inflows to the mixer decreasing by 68% in the 30 days following their implementation.
1/ The first section preview of our 2023 Crypto Crime Report is here, and it’s all about sanctions.
In this we look at how the US’ crypto-related sanctions strategy has evolved over time and 3 of OFAC’s biggest #crypto service designations to date.https://t.co/gOp1rHOQgx
— Chainalysis (@chainalysis) January 9, 2023
However, the company also emphasized that “no person or organization can ‘pull the plug’ as easily on Tornado Cash as they could with a centralized service” because Tornado Cash is a smart-contract-based decentralized platform.
Chainalysis used the darknet marketplace Hydra as an illustration. Hydra’s cryptocurrency inflows, on the other hand, dropped to nothing when German police seized its servers as a result of sanctions.
Chainalysis explained that Tornado Cash’s “front-end website was taken down” as a result of the sanctions, but that “its smart contracts can run indefinitely, meaning anyone can technically use it at any time.” The chain reaction went on:
“That suggests sanctions against decentralized services act more as a tool to disincentivize the service’s use rather than cutting off usage completely.”
Concerns that individuals and groups had allegedly used the mixer to launder billions of dollars’ worth of cryptocurrency since 2019, including the $455 million stolen by the North Korea-affiliated Lazarus Group, prompted OFAC to take strong action against Tornado Cash in August.
In November, the agency increased its pressure on the platform even further by amending those sanctions for: facilitating malicious cyber activities that, in the end, support the North Korean program for weapons of mass destruction.
According to Chainalsis’s most recent report, crypto hacks and scams were primarily responsible for the illicit use of Tornado Cash, accounting for roughly 34% of all inflows.
More Former FTX employees cooperate with prosecutors in Bankman-Fried case
Although the sanctions were unable to completely stop the mixer, they did successfully deter individuals from using that platform, resulting in a 68% decrease in total inflows the following month.
Although specific figures are not provided, the chart indicates that daily inflows reached nearly $25 million per day at times during the 30 days preceding the sanctions and then decreased to less than $5 million per day following them.
Its inflows decreased by 68% in the 30 days that followed its designation, indicating that those incentives appear to have been effective. This is especially significant in this instance because Tornado Cash is a mixer, and the report states that “mixers become less effective for money laundering the less funds they receive overall.”
A separate report released this week by the blockchain security company SlowMist also provided some clues regarding the kind of money that passed through Tornado Cash in 2022. The research conducted by the company reveals that 1,233,129 Ether (ETH) worth $1.62 billion was deposited into the platform over the course of the previous year, while 1,283,186 ETH worth $1.7 billion was taken out.
3/ TornadoCash: In 2022, users deposited a total of 1,233,129 ETH to it and withdrew 1,283,186 ETH from it.
ChipMixer: In 2022, users deposited a total of 40,065.33 BTC to it and withdrew 22,582.44 BTC from it.
View the full PDF report for additional details. pic.twitter.com/ib2KnnpN9b
— SlowMist (@SlowMist_Team) January 9, 2023
