Sanctions couldn’t ‘pull the plug’ on Tornado Cash: Chainalysis

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The sanctions targeting Tornado Cash, a decentralized cryptocurrency mixer, crippled the service but did not completely cut off its use, blockchain analysis firms share.

On August 8, the Office of Foreign Assets Control (OFAC) announced: Sanctions Against Cryptomixers For its role in laundering criminal proceeds.

in the report It was published On January 9, Chainalysis said the sanctions had had some effect, reducing total inflows to mixers by 68% in the 30 days since the sanctions took effect.

However, since Tornado Cash is a smart contract-based decentralized platform, he emphasizes, “With Tornado Cash, no person or organization can ‘unplug’ as easily as a centralized service.”

Chainalysis, by contrast, gave the example of darknet marketplace Hydra, where cryptocurrency inflows dropped to zero after German police seized its servers as a result of sanctions.

Chainalysis explained that the sanctions applied to Tornado Cash “destroyed its front-end website, but its smart contracts can run indefinitely, so technically anyone can use it at any time.” Added:

“This suggests that sanctions against decentralized services act as a tool to discourage the use of services rather than cutting them off completely.”

OFAC Hit hard with Tornado Cash Individuals and groups have used mixers to launder billions of dollars worth of cryptocurrency since 2019, including $455 million stolen by North Korea-linked Lazarus Group in August 2022. There was concern that

the agency then modified those sanctions In November, it cracked down on the platform even more, doing the following: [weapons of mass destruction] program. ”

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Chainalsis’ latest report shows that Tornado Cash fraud is primarily related to cryptocurrency hacks and scams, with an average of approximately 34% of all inflows coming from such sources. It has been.

While the sanctions did not stop Mixer completely, they effectively discouraged people from using its platform, reducing total inflows by 68% the following month.

While no specific numbers are given, this graph shows that inflows reached nearly $25 million per day in the 30 days before the sanctions, and then dipped below $5 million per day. indicates that

Before and after influx on sanctioned platforms: Chainalysis

“These incentives appeared to be strong, with a 68% drop in inflows 30 days after designation. This is especially important given the decline.”

Related: DeFi Security Losses to Increase by 47.4% to $3.64 Billion in 2022: Report

Another report from blockchain security firm SlowMist this week also gave some indications about the types of money flowing through Tornado Cash in 2022. According to the company’s research, 1,233,129 Ether (ethereum) last year, $1.62 billion worth was deposited into the platform and 1,283,186 ETH ($1.7 billion) was withdrawn.