In the first half of 2024, Tornado Cash, a prominent crypto mixing protocol, has seen a significant resurgence, with deposits exceeding $1.8 billion. This marks a 45% increase compared to the total deposits throughout 2023, as reported by blockchain analytics firm Flipside Crypto.
Surge in Activity Amidst Sanctions
Tornado Cash’s activity had significantly declined following sanctions imposed by the US government two years ago. However, the decentralized nature of the protocol has posed challenges for US authorities in monitoring its usage effectively. According to a recent report by blockchain analytics firm Chainalysis, the resurgence in 2024 aligns with a general uptick in market activity. Notably, Tornado Cash, along with other mixing services like WasabiWallet and JoinMarket, has experienced substantial growth.
Attracting Bad Actors
The platform has seen a notable influx of funds from hackers involved in significant thefts. The hacker behind the Poloniex exchange heist, who stole over $100 million last year, transferred $76 million to Tornado Cash in the past two months, as reported by Arkham Intelligence. Additionally, hackers responsible for exploiting the HECO Bridge and Orbit Chain moved $166 million and $47.7 million, respectively, to the mixer this year.
Background and Challenges
In August 2022, Tornado Cash faced sanctions from the US Treasury due to its involvement in laundering more than $455 million worth of cryptocurrency stolen by the North Korea-affiliated hacking group, Lazarus. Following these sanctions, monthly deposits to Tornado Cash plummeted by over 90%. Despite these challenges, the platform’s decentralized nature has allowed it to regain significant activity.
Legislative Crackdown
In response to the resurgence of crypto mixers, Democratic representatives have introduced the US Blockchain Integrity Act. This proposed legislation aims to disrupt the flow of illicit funds and promote transparency by prohibiting financial institutions, cryptocurrency exchanges, and registered money service businesses from accepting funds processed through a mixer. Non-compliance would result in civil penalties of up to $100,000.
Recent Convictions
The US government’s crackdown on crypto-mixing services continues. Recently, the founder of Bitcoin Fog, a $400 million crypto-mixing service, was convicted of money laundering. Roman Sterlingov was found guilty of money laundering, conspiracy to commit money laundering, operating an unlicensed money-transmitting business, and violations of the D.C. Money Transmitters Act. Similarly, Roman Storm and Roman Semenov, co-founders of Tornado Cash, have been indicted on charges of conspiracy to commit money laundering, conspiracy to violate US sanctions, and conspiracy to operate an unlicensed money-transmitting business.
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