Earlier this week, the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) sanctioned Tornado Cash, a smart contract-based virtual currency mixer. According to a press release published by the U.S. Department of the Treasury, Tornado Cash "is a virtual currency mixer that operates on the Ethereum blockchain and indiscriminately facilitates anonymous transactions by obfuscating their origin, destination and counterparties, with no attempt to determine their origin." The press release states that Tornado Cash has been used to launder more than $7 billion since 2019, including more than $450 million of cryptocurrency obtained through thefts by the Lazarus Group, a North Korean state-sponsored hacking organization. The press release also states that Tornado Cash received funds relating to recent thefts from cross-chain bridges, including the Harmony Bridge and the Nomad Bridge.
Tornado Cash, along with 38 unique cryptocurrency addresses, has been added to the Specially Designated Nationals List, a directory of sanctioned individuals and entities whose assets are blocked by the U.S. government and with whom U.S. persons are prohibited from transacting. As a result, all property and interests in property of Tornado Cash that is in the United States or in the possession or control of U.S. persons is blocked and must be reported to OFAC. According to the press release, "Those in the virtual currency industry ... should take a risk-based approach to assess the risk associated with different virtual currency services, implement measures to mitigate risks, and address the challenges anonymizing features can present to compliance with AML/CFT obligations ... mixers should in general be considered as high-risk by virtual currency firms, which should only process transactions if they have appropriate controls in place to prevent mixers from being used to launder illicit proceeds."
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