Several days ago, the US government did something fairly unusual. They sanctioned a piece of code, a software. The Office of Foreign Asset Control typically fills its list with individuals, companies and even governments, but now its deciding to include Tornado Cash.
What Is Tornado Cash?
Tornado Cash was a popular platform used by hackers and people who were aiming to remain anonymous with their cryptocurrency. The US government has now declared Tornado Cash sanctioned as well as every single cryptocurrency wallet that has interacted with the code. Interacting with sanctioned wallets, platforms, companies or people is a felony in the US and can come with jail time and heavy fines.
These sanctions have left every single wallet that has interacted with Tornado Cash to be sanctioned. This has resulted in Holdnaut freezing withdrawals, Circle blacklisting related addresses, and GitHub suspending related accounts as well. These centralized entities could have been prosecuted for interacting with sanctioned individuals, whether the sanctioned wallet is guilty or not. This has caused a lot of people to lose a lot of money.
The cryptocurrency community is not taking too kindly to the news of these sanctions, with one of the owners of a sanctioned wallet, extremely unhappy. This wallet started sending 0.1 ETH to wallets of prominent figures and celebrities, in an attempt to prove the ridiculousness of the blanket sanctions. Technically, each of these celebrities and individuals have interacted with a tainted and sanctioned wallet and have committed a felony. The law specifically writes that not having knowledge of it, is not enough to get off the hook.
There are rumors that the US government predicts North Korea to be behind many scams run through Tornado Cash, allowing them to not be traced. This is realistic, as many black-hat and cryptocurrency hacks get traced back to North Korea. For now, interacting with any wallets on the sanctions list can put you in violation, although hopefully the wallets are not sanctioned forever and people will be able to get their funds back.
Just days after this announcement, the suspected developer of Tornado Cash was arrested.
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