On August 8, 2022, the Office of Foreign Assets Control of the United States Department of the Treasury
On the same day, the domain used to host the project was removed and GitHub
However, the Feds weren’t just looking for Tornado Cash as an entity. They were also chasing the protocol builders. Two days after being blacklisted, Alexey Pertsev, one of the founders of the protocol, was
With that, the Treasury Department had effectively eliminated Tornado Cash almost entirely. However, the question remains; because? What made Tornado Cash so dangerous that the federal government fielded everything it had to take it down?
The enigma of mixing
When people talk about the benefits of Bitcoin as a currency and indeed Crypto as a financial system, they never fail to mention anonymity. Bitcoin, they often say, is great because it offers anonymity, which is something the traditional banking system doesn’t offer by design. However, this is not entirely true. For example, if you keep your coins in a centralized exchange, you have very little anonymity.
Even if you keep your coin in your address, on-chain analytics could help spy on third parties or link the address to your real-world identity or track what you are doing with your funds.
For people who require complete financial privacy, this simply wouldn’t be good. Since the world of cryptocurrencies is probably the closest approximation to a free market that anyone can find, it wasn’t long before this problem was solved.
The solution to the pseudonym problem of cryptocurrencies was something called
This gives law enforcement a huge headache. Before the popularity of these mixing services, law enforcement could track down laundered or stolen crypto funds with a great degree of accuracy. In fact, they could make sure that no other reputable organization transacts with tainted addresses or cryptocurrencies.
Bitcoin mixers throw a wrench into that wheel and make the idea completely unsustainable. It is easy, as a crypto maximalist, to argue that the government is wrong to be against these mixers. However, the facts paint a more nuanced picture.
In 2013, following the Sheep Marketplace robbery, Bitcoin Fog, a mixer, was used for
In other words, it is clear that these mixers are being used for illegal transactions and the government is right to care.
Tornado The Tornado of Cash
The US government has been on the trail of Bitcoin mixers for a long time. Bitcoin Blender, one of the largest bitcoin mixers,
Blender.io, one of the largest Bitcoin mixing services in the world, also got its share of sanctions after the US Treasury Department’s Office of Foreign Assets Control
These arrests made it clear that the government was stepping up its surveillance of the crypto space and was determined to make it difficult for criminals to launder stolen funds.
However, Tornado Cash’s current problems aren’t just because it’s a Bitcoin mixer. In other words, it wasn’t targeted because it was just a common Bitcoin mixing service. There was something else.
In May 2022, there was a daring hack on the Ronin Bridge, a blockchain project associated with the popular play-to-earn game Axie Infinity. The hack
But that robbery is just the biggest in a long line of incredible money laundering activities. According to law enforcement, Tornado Cash, since 2019, has been a willing tool used
Not even Lazarus is Tornado Cash’s only customer. The service was also used to launder stolen funds
All of these show that Tornado Cash, at least in the eyes of law enforcement, wasn’t just an innocent open source protocol that anyone could use. It was a favorite tool of hackers and criminals and they used it whenever they could and how they could. Like almost all Bitcoin mixing services, Tornado Cash has hardly any guardrails to stop cybercriminals from using it. Despite public statements proposing the KYC protocols, the service continued to function in the most laissez-faire fashion. In retrospect, this meant that the service would always be sanctioned. It was completely inevitable.
What does this mean for the future of bitcoin mixing
It’s hard to imagine a future where law enforcement efforts are enough to stop Bitcoin mixing. While they can always take big players out of the game, the fact that these services have no regulatory obligations and can be used for legal and illegal purposes means they will be leaving soon.
Right now, it seems that the big players in cryptocurrencies are content to disown these mixers. Tether, for example,
These are funds that could have helped countless innovations and could have helped build a more vibrant and secure crypto ecosystem. These are funds that may never be recovered.
While Bitcoin mixing, and indeed Bitcoin mixers, are unlikely to go out of style on their own, there is hope that they may eventually become obsolete. According to
. . . Comments & Moreover!