Home Blockchain Blockchain, privacy advocates push back against Tornado Cash sanctions

Blockchain, privacy advocates push back against Tornado Cash sanctions

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Blockchain, privacy advocates push back against Tornado Cash sanctions

Lawyers accuse the Treasury Department’s Office of Foreign Assets Control of abuse after Monday’s decision to sanction Tornado Casha virtual currency mixer that federal officials say is responsible for more than $7 billion in proceeds laundered since its inception in 2019.

A range of organizations, including financial privacy experts to virtual currency advocates, say the sanctions imposed on Tornado Cash will harm the ability of businesses and consumers who use virtual currency to transact securely and privately.

Some are raising questions about the broader implications of whether the government’s global fight against ransomware will trigger a broader conflict with certain basic civil liberties.

Jake Chervinsky, chief policy officer at the Blockchain Association, said the Treasury Department may have opened a Pandora’s box through sanctions.

“There’s a good reason sanctions have always applied to entities, not technology,” Chervinsky said in a statement. Posting on Twitter. “Treating Tornado Cash as an entity makes no sense.”

Tornado Cash is an immutable smart contract that mixes a pool of various cryptocurrencies from many different senders to protect the privacy of on-chain transactions, said DeFi Education Fund policy director Miller Whitehouse-Levine.

“People seek confidentiality in transactions for a number of legitimate reasons, such as donating money to causes they believe in or paying for sensitive medical treatment,” Whitehouse-Levine said via email.

While conceding that the tool can be used for illicit activities, Whitehouse-Levine said the Treasury sanctions put the whole debate in “uncharted waters” because the decision effectively banned an open-source software protocol.

The sanctions are part of a broader effort by federal law enforcement and financial regulators to quell the rise of malicious cybercrimes. Treasury officials have now sanctioned the second virtual currency mixer since May, when the department levied a similar fee penalties against Blender.io.

According to the Treasury, Tornado Cash was used by the state-sponsored Lazarus Group to launder more than $455 million in the largest known virtual currency heist to date, a $620 million stolen from Ethereum back to North Korea. Tornado Cash was then used to launder $96 million in the June Harmony Bridge case and $7.8 million in the San Francisco-based Nomad heist earlier this month, according to Treasury officials.

In May, OFAC sanctioned Blender.ioa virtual currency mixer that was also allegedly used to launder approximately $20.5 million worth of proceeds from the same heist.

Cybersecurity researchers claim that state-sponsored threat actors and other threat actors have long used cryptocurrency tools in order to conceal extortion schemes from authorities and make the transfer of funds incredibly difficult to trace or recover.

“We have observed North Korean actors repeatedly and consistently using these services as well as leveraging other methods to move ill-gotten funds into a variety of schemes to support the Pyongyang regime,” said analyst Joe Dobson. principal at Mandiant, by e-mail. . “These operations frequently spill over into cyberspace, demonstrating the creativity and perseverance of these operators.”

Andrew Fierman, head of sanctions strategy at Chainalysis, confirmed that ransomware groups use blenders to hide the flow of funds after ransom payments are made. But Tornado Cash was not among the preferred mixers used by these players, so he doesn’t think the penalties will have a huge impact on mitigating malicious ransomware activity.

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