Treasury on Monday prohibit Americans use cryptocurrency platform Tornado Cash, saying the service has helped criminals launder more than $7 billion in virtual currency.
The crackdown is the latest move by the U.S. government to rein in the crypto industry, as lawmakers and regulators increasingly focus on the volatility of virtual currencies and their role in facilitating hacking and other crimes. The U.S. Treasury Department called the platform a “threat to U.S. national security,” blacklisting Tornado Cash as an entity that makes it illegal for Americans to send or receive money using the service.
“Despite other assurances from the public, Tornado Cash has repeatedly failed to implement effective controls designed to prevent it from laundering money for malicious cyber actors,” Brian Nielsen, Undersecretary for Terrorism and Financial Intelligence, said in a statement. “
Criminals have long used virtual currencies for anonymous transactions, exchanging digital coins for drugs or other illegal goods. But the anonymity of encryption does not provide full security: encrypted transactions are recorded on a publicly visible ledger called a blockchain, allowing law enforcement officials to track the funds.
Platforms like Tornado Cash aim to make this tracking more difficult. These crypto “mixers” take multiple transaction streams and combine them to mask the origin and destination of funds. Tornado Cash was used to launder more than $455 million in cryptocurrency stolen this year by North Korea-backed hackers, the Lazarus Group, according to the U.S. Treasury Department.
Tornado Cash’s official Twitter account returned no news. Roman Semenoff, one of the company’s three founders, did not respond to a request for comment.
Since its launch in 2019, Tornado Cash has gained notoriety largely because blockchain records show that hackers used it to transfer stolen cryptocurrency.exist interviewMr. Semenov defended the service, saying the software protects the privacy of legitimate cryptocurrency traders who could be targeted by kidnappers or thieves.
In a statement, cryptocurrency advocacy group Coin Center criticize Tornado Cash is a neutral platform that “can be used for good or bad like any other technology,” the Treasury Department statement said.
“It is not any particular bad actor who is being sanctioned,” the statement said. “Instead, all Americans may want to use this automated tool in order to protect their privacy when transacting online.”
As the digital currency market grows, the federal government is increasingly cracking down on poorly regulated cryptocurrency companies. Stablecoin company Tether fine The Commodity Futures Trading Commission was charged last year for misrepresenting its reserves, while the Justice Department last month brought insider trading charges against a former employee of Coinbase, the largest U.S. cryptocurrency exchange.
Cryptocurrency exchange Kraken is also under investigation by the Treasury Department for possible violations of U.S. sanctions.