U.S. Sanctions Trigger 90% Drop in Tornado Cash Trading Activity
Following the imposition of U.S. sanctions on Tornado Cash in August 2022, accusing it of being a key tool for money laundering, the utilization of this cryptocurrency mixer experienced a steep 90% decline, as revealed by a Wednesday report from TRM Labs.
Tornado Cash, which allows cryptocurrency users to exchange tokens while masking wallet addresses on various networks like Ethereum, BNB Chain, Arbitrum, Avalanche, and Optimism, was not inherently malevolent. However, it had gained traction among crypto wrongdoers seeking to obfuscate the source of unlawfully obtained funds.
The U.S. Department of Justice further alleged that Tornado Cash facilitated the laundering of more than $1 billion in unlawful funds, implicating groups like the North Korean hacker organization Lazarus.
While TRM researchers observed that a majority of North Korean hackers had shifted towards alternative Bitcoin mixers, some illicit use of Tornado Cash still persisted.
The report emphasized:
"Despite the government's efforts to hinder Tornado Cash's service, a few illicit actors remain undeterred. This demonstrates that while the sanctions posed a challenge, they did not entirely halt all illicit activities."
Between February and July of 2022, transactions amounting to over $2.8 billion flowed through Tornado Cash. However, within the same period of 2023, volumes dropped to $425 million, according to the report.
Despite facing widespread criticism from the cryptocurrency community, the impact of the sanctions was relatively limited. In August, a collective of crypto investors and developers, supported by Coinbase, lost a lawsuit contesting that the Treasury Department had overreached its jurisdiction.
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