In sanctioning what it called the “notorious virtual currency mixer Tornado Cash” on Monday (Aug. 8), the Treasury Department kicked off what could be the beginning of a more aggressive push to lift the veil of secrecy that much of the cryptocurrency industry exists behind.
The Office of Foreign Assets Control (OFAC) sanctioned Tornado Cash to settle assertions that it played a role in laundering more than $7 billion worth of virtual currency since its creation in 2019, including more than $455 million allegedly stolen by the Lazarus Group, a North Korea-sponsored hacking group that was sanctioned by the U.S. that same year.
A number of bitcoin and ether wallet addresses were also sanctioned, prohibiting financial institutions — including crypto exchanges — from doing business with them. Americans are banned from using the Tornado Cash service.
Crypto mixing projects are generally decentralized finance (DeFi) platforms that allow people to obscure the origins of cryptocurrencies like bitcoin and ether, which can be tracked from one transaction to another via their public key code.
See also: Crypto Crime Series: When Privacy Counts, Crypto Users Turn to Mixing Services
Mixers use a variety of techniques, most notably bundling a group of users’ cryptocurrency together into a single wallet address and then returning it randomly in small batches so it isn’t clear who put in which specific tokens.
Specifically, OFAC cited the more than $96 million stolen in the…
