US vows to ‘aggressively pursue’ crypto mixers following Tornado Cash sanctions

U.S. Secretary of State Anthony Blinken warned that the administration would continue to “aggressively pursue” crypto mixers suspected of laundering illicit funds.

We’ll continue to aggressively pursue actions against currency mixers laundering virtual currency for criminals. Today, @USTreasury sanctioned virtual currency mixer Tornado Cash, which has been used to launder money for a U.S.-sanctioned DPRK state-sponsored cyber hacking group.

— Secretary Antony Blinken (@SecBlinken) August 8, 2022

The comments came as the U.S. Treasury enacted sanctions against Tornado Cash over allegations it had washed over $7 billion worth of cryptocurrencies since 2019. A press release stated that Tornado Cash had repeatedly failed to implement “effective controls” to stop money laundering by criminals.

As a whole, the crypto community responded negatively to the sanctions, with many voicing concerns over hypocrisy and governmental overreach – particularly as the platform is a neutral tool that runs autonomously.

Vice Writer and self-described cyber historian Lorenzo Franceschi-Bicchierai summed up the argument by saying code is an expression of free speech and so cannot be illegal, let alone sanctioned.

With that, thoughts turn to Secretary Blinken’s statement and whether his words effectively spell the end for crypto mixers and personal freedoms in the U.S.

Is this the end of crypto mixers?

In justifying sanctions against Tornado Cash, the U.S. Treasury said the platform had repeatedly failed to implement controls to stop criminals from money laundering on the platform. However, crypto mixers do not operate Know Your Customer (KYC) controls by their inherent nature.

Tornado Cash co-founder Roman Semenov explained that the platform is decentralized and autonomous, meaning it operates without third-party control. To that end, it has no corporate office or staff, and the user interface is lifted from an Ethereum Name Service domain.

Nonetheless, the U.S. Treasury stated that crypto “mixers that assist criminals are a threat to U.S. national security.” And that it will continue monitoring mixer activity with a view to clamping down on illicit financial risks.

“[The] Treasury will continue to investigate the use of mixers for illicit purposes and use its authorities to respond to illicit financing risks in the virtual currency ecosystem.”

The crypto community responds

Over five hundred replies were posted to Secretary Blinken’s tweet, the majority of which condemned the actions of the Treasury.

For example, one Twitter user called out the hypocrisy of sanctioning Tornado Cash when HSBC Bank paid a fine $1.9 billion fine on charges of money laundering. The incident happened approaching ten years ago. However, this does not detract from lawmakers treating banks favorably.

FatManTerra waded into the discussion by correcting Secretary Blinken on his designation of Lazarus and Tornado Cash as connected entities. He stated the hacking group had merely used the mixer platform.