Recently, Tornado Cash has been making a lot of headlines in the United States. But, in a surprising move, the Treasury Department has refused to answer a Republican lawmaker’s questions about the blacklisting of coin mixer Tornado Cash.
In a letter addressed to the Department of the Treasury around five months ago, Congressman Tom Emmer (MN-06) asked several questions surrounding its Tornado Cash ban, noting that the underlying “technology is neutral, and the expectation of privacy is normal.”
Tornado Cash is a very popular “coin mixer” or a crypto mixer application that allows people to anonymously send and receive Ethereum, the second largest cryptocurrency by market capitalization.
Last year in August, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) banned US citizens from using it, alleging that criminals have been using it to launder dirty funds.
On January 9, Jonathan Davidson, Assistant Secretary for Legislative Affairs at the Treasury, replied to the lawmaker’s letter, which he posted on Wednesday. In his defense, the treasury executive stated that “because Tornado Cash remains the subject of active litigation, it would not be appropriate for Treasury to comment further on the entity’s designation at this time.”
In his tweet accompanying the Treasury’s response, the lawmaker said that an application like Tornado Cash is quite efficient and necessary for crypto transactions to preserve the privacy people expect from cash. In addition, Emmer called this move of banning the application a “destructive policy decision.”
Prior to this, Emmer had asked Treasury Secretary Janet Yellen to explain why the department had sanctioned a decentralized application rather than a centralized entity that people operate. He also pointed out that anonymizing software isn’t “subject to Bank Secrecy Act and obligations.”
In addition, the lawmakers highlighted that it wasn’t practical or logical to sanction people who have received Ethereum unwillingly from someone using the application. A victim regarding the received was proven when an anonymous troll sent celebrities with Ethereum wallets the anonymized cryptocurrency.
However, the Treasury had clarified that it would not seek to punish people who were “dusted” with crypto linked to Tornado Cash and would also provide a legal avenue for individuals to withdraw funds from the platform without being involved in a foul of sanctions.
Sources reveal that when the Feds decided to ban Tornado Cash in August of 2022, it upset many in the crypto industry, including the big players. One of the largest crypto firms is also funding a lawsuit against the Treasury, claiming that the application’s ban is punishing people who haven’t done anything wrong along with lesser privacy and security people.
The US authorities have claimed that the application was highly used by the North Korean state-sponsored hacking group Lazarus Group as a go-to tool for obscuring stolen funds. Todayq News reported in November last year that the Treasury amended the sanctions on Tornado Cash and added two people to its list of Specially Designated Nationals allegedly engaged in “transportation and procurement activities” for the Democratic People’s Republic of Korea.
According to a study, the crypto-related sanctions from the US authorities significantly reduced the potential revenue of criminal enterprises. The study also included the revenue of Tornado Cash and quoted that before the sanction, 34% of Tornado Cash’s funds came from illegal sources whereas 99.7% of the unlawful funds that Tornado Cash received over the course of two months were stolen money.
In addition, 65.7% of all the stolen money that the mixer got was in cryptocurrency stolen during the Harmony Bridge incident. Fund inflows to Tornado Cash decreased by 68% in the 30 days following the designation of the sanctions.