Ethereum’s crypto mixer Tornado Cash, stated today that it uses a tool from blockchain data platform Chainalysis to bar addresses sanctioned by the U.S. Office of Foreign Assets Control [OFAC] from using the privacy app. “Maintaining financial privacy is essential to preserving our freedom, however, it should not come at the cost of non-compliance,” the firm wrote.
However, one of the protocol’s founders later tweeted that the blockade is only applicable to the user-facing decentralized application [dapp], not the underlying smart contract.
Notably, one of the founders of Tornado Cash, recently said it is “technically impossible” for sanctions to be enforced against decentralized protocols because of how they are designed. We don’t have more access to it than any other users” of the protocol, Roman Semenov, one of three founders of Tornado Cash said in an interview from Thailand. “There’s not much we can do.”
Regulators may not see it the same way.
Ari Redbord, head of legal and government affairs at blockchain intelligence firm TRM Labs said, “What FATF says is ‘hey, we don’t care what you call yourselves, decentralized or DeFi, what we care about is what you are doing.”
Despite Tornado Cash’s popularity, hackers seem to have a field day
Tornado Cash has seen rapid growth over the last year to become one of the most popular crypto mixers. Nicolas Smart, director of blockchain intelligence and data at Crystal, said Tornado Cash’s dominance has increased in part because of the growing popularity of DeFi, which has resulted in more crypto wallets holding greater amounts of wealth.
The decentralized mixing tool founded in 2019 has grabbed the limelight mostly for its usage by questionable actors in several high-profile hacks. In January, hackers used the tool to swipe $34 million from Crypto.com.
One cannot forget the infamous crypto personality “Sifu”, who was involved with the Wonderland project and turned out to be the co-founder of the failed crypto exchange QuadrigaCX.
The announcement follows Thursday’s events reported by TronWeekly about the North Korean hackers who were allegedly behind the $625 million exploits of Axie Infinity’s Ronin blockchain. The Ronin attackers “have so far sent $80.3 million worth of ETH through Tornado Cash,” tracing firm Elliptic wrote Thursday.