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Wednesday, March 22, 2023

US Treasury Sanctions Tornado Cash (Again)

key takeaways

  • The US Treasury and its OFAC department have redesignated the authorized coin mixer Tornado Cash.
  • Treasury linked the new sanctions to its broader efforts to defund North Korea’s weapons of mass destruction programs.
  • Tornado Cash was first sanctioned in August, while a September update clarified the scope of the sanctions.

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The US Treasury has placed new sanctions on Tornado Cash, alleging its use by the North Korean government.

Tornado Cash cleared

Ethereum’s top mix protocol has been sanctioned once again.

In a press release, the US Department of the Treasury announced today that it was amending sanctions related to Tornado Cash, noting that the service had been used to provide financial, material, and technological support to the North Korean government.

Treasury re-designated the project on the grounds that it has supported “illicit cyber activities originating from … outside the United States.” Specifically, Treasury stated that Lazarus Group used Tornado Cash in March to move $455 million in stolen cryptocurrency.

Treasury also sanctioned two people associated with Air Koryo, North Korea’s state-owned airline. Although not directly related, both actions are part of his efforts to defund North Korea’s weapons programs.

Today’s new designation replaces the sanctions imposed on Tornado Cash this summer. Today’s update reads: “The August 8, 2022 Tornado Cash designation is no longer operational and is being completely replaced.”

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 people 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 are underway to challenge the policy. Coin Center, with the financial backing of Coinbase, has filed a lawsuit against the Treasury to that end.

Tornado Cash is still operational and has a total locked value of around $200 million. Because the coin mixer is a decentralized application, authorities cannot directly block transactions.

Disclosure: At the time of writing, the author of this article owned BTC, ETH, and other digital assets.

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