Key Takeaways
- The U.S. Treasury and its OFAC department have redesignated the sanctioned coin mixer Tornado Cash.
- The Treasury related the new sanctions to its broader efforts to defund North Korea’s WMD programs.
- Tornado Cash was first sanctioned in August, while a September update clarified the scope of the sanctions.
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The U.S. Treasury has imposed new sanctions on Tornado Cash, alleging its use by the North Korean government.
Tornado Cash Re-Sanctioned
Ethereum’s top mixing protocol has been sanctioned once again.
In a press release, the U.S Treasury Department announced today that it was amending sanctions concerning Tornado Cash, noting that the service had been used to provide financial, material, and technological support to the North Korean government.
The Treasury redesignated the project on the grounds that it has supported illicit “cyber-enabled activity originating from… outside the United States.” Specifically, the Treasury stated that Lazarus Group used Tornado Cash in March to move $455 million of stolen cryptocurrency.
The Treasury also sanctioned two individuals connected to Air Koryo, North Korea’s state-owned airline. Though not directly related, both actions are part of its efforts to defund North Korea’s weapons programs.
Today’s redesignation supersedes the sanctions imposed on Tornado Cash this summer. Today’s update reads: “The August 8, 2022 designation of Tornado Cash is no longer operative and is wholly replaced.”
The Treasury’s FAQ page also indicates that Tornado Cash developers, founders, DAO members, and users are not designated under its sanctions—a policy in line with a September update. Instead, the sanctions prevent individuals from using Tornado Cash by blacklisting the project’s crypto addresses and website.
Sanctions against the project are unpopular with the general public, and efforts to challenge the policy are underway. Coin Center, with financial backing from Coinbase, has filed a lawsuit against the Treasury to that end.
Tornado Cash is still operational and has about $200 million in total value locked. Because the coin mixer is a decentralized application, authorities cannot directly block transactions.
Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and other digital assets.
