TL;DR
- Tornado Cash has received $1.9 billion in deposits in the first half of 2024, despite US Treasury sanctions.
- Sanctions make it illegal for US users to interact with Tornado Cash, but activity remains high.
- Coin Center filed a lawsuit in 2022 arguing that the sanctions are illegal.
Despite sanctions imposed by the US Treasury in August 2022, Tornado Cash, a cryptocurrency mixer, has seen a surprising increase in deposit volume.
According to data from Flipside Crypto, Tornado Cash has received approximately $1.9 billion in deposits during the first six months of 2024, representing a 50% increase compared to the entire year of 2023.
This is notable considering that the sanctions prohibit US users from interacting with the protocol, causing any wallet that does so to be blacklisted, preventing its use on legally compliant cryptocurrency exchanges.
Despite these restrictions, Tornado Cash remains a popular destination for large hacker groups looking to hide the origin of their illicit funds.
Data from Arkham Intelligence reveals that the hacker behind the $100 million exploit on the Poloniex exchange has transferred $76 million to the mixer since May.
Additionally, those behind the HECO Bridge and Orbit Chain exploits have moved $166 million and $48 million, respectively, into Tornado Cash in the first half of the year.
Most recently, a confirmed wallet address used in the $235 million hack of Indian exchange WazirX was funded via a Tornado Cash deposit.
Coin Center filed a lawsuit in October 2022 in response to the sanctions, arguing that smart contracts like Tornado Cash cannot be considered entities, which is a requirement for the sanctions to be enforceable.
They further argue that users are simply recovering their own money without intermediation or mixing of assets, thus challenging the legality of the sanctions imposed.
The lawsuit has been backed by several major cryptocurrency firms, including Coinbase, and advocacy groups like The Blockchain Association and Coin Center, who also claim the sanctions are illegal.
Debate on the legality of sanctions
The U.S. Treasury Department maintains that cryptocurrency mixers pose a threat to national security and that Tornado Cash repeatedly failed to implement adequate controls to stop money laundering.
As a result, sanctions remain in place, and anyone who interacts with the protocol risks facing severe legal repercussions.
However, the constant flow of deposits and withdrawals on Tornado Cash indicates that many users are willing to take this risk, possibly due to the need for anonymity in their transactions.
The Tornado Cash case has highlighted the tension between government regulation and financial privacy in the cryptocurrency space.
The founders of the mixer, Alexey Pertsev, Roman Storm and Roman Semenov, have faced significant consequences.
Pertsev was sentenced to more than five years in prison in the Netherlands on money laundering charges in 2023.
Storm was arrested in the United States in August and pleaded not guilty to all charges, being released on $2 million bail.
Semenov, meanwhile, remains at large.
The controversy surrounding Tornado Cash underscores the difficulty of balancing national security with individual rights in the context of emerging technologie.
While regulators insist the measures are necessary to prevent crime, cryptocurrency advocates argue that such actions undermine fundamental principles such as privacy and freedom of expression.
With the Coin Center lawsuit still ongoing, the outcome of this case could have significant implications for the future of cryptocurrency regulation and user rights around the world.
