According to a report from blockchain analytics firm TRM Labs, the usage of the crypto mixer Tornado Cash dropped significantly by 90% following U.S. sanctions. The U.S. Treasury Department’s Office of Foreign Asset Control (OFAC) had blacklisted Tornado Cash in August 2022, alleging its use by malicious actors for money laundering. Tornado Cash enables crypto users to exchange tokens while concealing wallet addresses on various blockchain networks like Ethereum, BNB Chain, Arbitrum, Avalanche, and Optimism. While the service itself isn’t inherently malicious, it had increasingly become a tool for crypto criminals to obscure the origins of stolen funds.
The U.S. Department of Justice asserted that Tornado Cash was used to launder more than $1 billion in illicit funds, including by the North Korean hacker group Lazarus.
TRM researchers noted that, although North Korean hackers have mostly shifted to other Bitcoin mixers, some illicit use of Tornado Cash persists. The report highlighted that while the government’s actions hampered Tornado Cash’s services, a few illicit actors have not been discouraged, demonstrating that the sanctions posed a hurdle but didn’t entirely stop nefarious activities.
Between February and July 2022, Tornado Cash facilitated transactions worth over $2.8 billion. However, during the same period in 2023, transaction volumes dropped significantly to $425 million.
The crypto community largely criticized the sanctions, but they had limited impact. In August, a group of crypto investors and developers lost a lawsuit funded by Coinbase that argued the Treasury Department had exceeded its authority in imposing the sanctions.
By FCCT Editorial Team
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