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Tornado Cash, a cryptocurrency mixer, experienced a dramatic 90% fall in usage after it was sanctioned by the U.S. government last year, according to a recent study by TRM Labs. This service, operating on multiple networks including Ethereum and BNB Chain, provided users with a platform to swap tokens without revealing their digital wallet addresses.
In August 2022, the U.S. Treasury Department's Office of Foreign Asset Control (OFAC) singled out Tornado Cash, claiming it was the preferred method for ill-intentioned parties to cleanse money. Though the platform wasn't inherently malevolent, it caught the attention of authorities because of its popularity among cryptocurrency offenders trying to hide the origins of their ill-gotten gains.
The U.S. Department of Justice supported these allegations, suggesting that over $1 billion in illegal funds was laundered using Tornado Cash. Among those implicated were hacker collectives from North Korea, including the notorious Lazarus group.
While the latest research from TRM Labs pointed out that these North Korean hacker factions have largely transitioned to alternative Bitcoin mixers, a minority continue their illicit operations via Tornado Cash. The study also highlighted that while the U.S. government's measures have significantly hampered the mixer's operations, some determined wrongdoers remain undeterred. This reveals that the measures implemented acted more as a stumbling block rather than an insurmountable barrier.
From a transaction perspective, Tornado Cash oversaw deals worth roughly $2.8 billion from February to July in 2022. However, during the same duration in 2023, this value plummeted to just $425 million.
Despite the negative sentiment from the cryptocurrency community regarding the U.S. sanctions, their objections bore little fruit. Notably, in the same month of the sanctions, a cohort of cryptocurrency enthusiasts and developers, backed financially by Coinbase, lost a legal battle against the Treasury Department, claiming it had overreached its boundaries.
