The United States Treasury is sanctioning the Ethereum-based Tornado Cash for circumventing its international laws and engaging in business with countries that the United States sanctions. In a statement from the U.S. Treasury, they announced that all assets of Tornado Cash are effectively frozen in the United States.
Americans will not have access to either their funds on the Tornado Cash network or their wallets. Is this the start of crypto vs the Treasury?
A Season of Crackdowns
This latest crackdown against Tornado Cash comes as no surprise during a season of increased legislation. After the tumultuous fall of stablecoin Terra earlier this year, the United States government put on their worker’s hats and began to do what they do best: financial regulation. And so, the SEC along with the Treasury has let the crypto market know that they intend to investigate everyone and everything that misbehaves.
This started with embattled Coinbase and the litany of charges they face from insider trading to listing unregistered securities on their exchange. And now Tornado Cash, the once lauded privacy exchange is officially barred from doing business in the United States until the Treasury’s investigation concludes. Why is the Treasury setting its financial scopes on Tornado Cash?
According to a statement issued by the Treasury Department, Tornado Cash engaged in illicit trading with countries that are actively sanctioned by the United States. In particular, the Treasury named North Korea and Russia as its two main culprits. North Korea represents more than $620 million worth of crypto trades.
Where did Tornado Cash go Wrong?
Tornado Cash has been in operation since the Spring of 2019 when the exchange first made its debut in the crypto sphere with a product that emphasized privacy. And it was this exact pillar in both the company’s coding and mission statement that made it an ideal spot for everyone and anyone looking to engage in illicit activities.
In other words, the word around town was that Tornado Cash was the place to go to if you happened to hack a company or organization and you are looking to transfer those funds discreetly.
And so, that is exactly what hackers and other criminals did–using the Tornado Cash exchange to illegally get off with more than $7 billion in hacking funds alone. From the infamous hack by the North Korean hacking group, the Lazarus Group of more than $620 million, to the smaller hacks of Nomad’s $7.8 million and Harmony’s $96 million, there is no doubt that the Tornado Cash network has been used for stage elaborate heists. And it is because of this that the United States Treasury has chosen to freeze the assets and overall operations of Tornado Cash.
The Crypto community is largely unfazed by government investigations, now that they are at an all-time high. However, folks are worrying because these new government measures often counteract the very principles of crypto, namely privacy and autonomy.
A statement issued on Monday by the crypto think tank and outspoken critic of the U.S. regulatory nature criticized The Treasury’s Monday decision for “sanctioning a tool that is not an alias of any person meriting sanction. Any American who wishes to use her own money and a freely available software tool to maintain her own privacy—including for otherwise entirely legal and personal reasons.”
According to Coin Center, the sanctions also have uncertain legal ramifications because they potentially put Americans who are sent money through a Tornado address at risk of violating the Treasury’s rules—even though they can’t reject the transaction due to the nature of blockchain.
What do you think, dear reader? Is the Treasury overstepping its bounds?