The Office of Foreign Assets Control (“OFAC“) of the United States Department of the Treasury has added addresses belonging to the Ethereum-based privacy protocol, Tornado Cash, to its sanction list. The latest development represents the latest attempt by the regulatory authority to curb bad actors in the cryptocurrency industry.

U.S. Treasury Sanctions Tornado Cash

The Treasury Department provided reasons for the Tornado Cash sanctions in an accompanying press release. The privacy protocol has allegedly helped bad actors launder over $7 billion worth of cryptocurrency since launching in 2019. Most recently, Tornado Cash has aided the masterminds behind the $625 million hack of play-to-earn game Axie Infinity, and the $100 million hack on Harmony protocol.

Like most cryptocurrency mixers, the Tornado Cash protocol receives coins from depositors and obfuscates the source by mixing it with clean transactions. This practice preserves privacy but also presents an attack vector for bad actors.

The Treasury Department has alleged that North Korea-sponsored hacking group Lazarus was behind most large-scale crypto security breaches targeting DeFi and cross-chain bridge protocols. Sanctioning Tornado.Cash addresses could inhibit the ability of the alleged hackers to freely move stolen funds, increasing the chances of authorities recovering these assets.

According to the Treasury Department, Tornado Cash has “repeatedly failed to impose effective controls designed to stop it from laundering funds for malicious cyber actors on a regular basis.”

The new sanction mandates U.S.-based entities and individuals to report any Tornado Cash property or interests to the OFAC. Additionally, entities such as crypto exchanges must promptly report any crypto addresses interacting with the provided Tornado Cash addresses.

Tornado Cash (TORN) Hardly Impacted by OFAC Sanction

TORN, the project’s native and governance token, only saw a mild 2% drop following news of the OFAC Sanction on Tornado Cash. TORN is currently trading at $29.67 at the time of writing, falling below the 24-hr high at near $31.5.

(Source: CoinMarketCap)

Although OFAC’s list of sanctioned addresses does not include the TORN token contract address, the possibility of the token being delisted on centralized exchanges, especially Binance, is one industry observers are keeping an eye on.

Wilfred Michael

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