Tornado Cash Remains Under Scrutiny Despite Sanctions Lift
Tornado Cash, a decentralized Ethereum transaction privacy tool, has remained under scrutiny since its 2022 sanctions by the U.S. Treasury's Office of Foreign Assets Control (OFAC). Despite sanctions being lifted, concerns persist due to its use in money laundering, including activities linked to North Korean hacking groups.
Tornado Cash operates by mixing cryptocurrency deposits from multiple users within its smart contract, making it challenging to trace the original source of transactions. It employs zk-snarks, a type of zero-knowledge proof, to conceal the connection between sender and recipient addresses. This process enhances the privacy of Ethereum transactions.
The platform's decentralized management through a DAO and use of a 'torn' token have not shielded it from regulatory attention. In August 2022, OFAC sanctioned Tornado Cash and associated individuals, including Roman Storm, who was later charged with money laundering conspiracy and sanctions violations in 2023. Although sanctions were lifted early in 2023, ongoing investigations and warnings from experts suggest that further risks and restrictions are possible.
Tornado Cash's role in illicit finance activities keeps it under close watch. Despite its lifting, the potential for further sanctions or restrictions remains, as regulatory and law enforcement bodies continue to monitor decentralized mixers and their involvement in money laundering.
