Cryptocurrency mixing protocols already had a bad reputation, mostly related to money laundering. The United States just banned the most famous of them, the Tornado, but that doesn’t mean the end of them.
The news dropped on August 8, 2022: The US Treasury announced that it was sanctioning Tornado Cash, a cryptocurrency mixing protocol, and banned US citizens from using its services. The US agency accuses Tornado of having laundered $7 billion since its creation in 2019.
The news is not surprising: in recent years, more and more gangs or hackers are using these mixers to cover their tracks and so that the authorities cannot find them. With each new hack, the use of these mixer protocols has therefore become increasingly controversial.
However, it’s not just cybercriminals who use mixer protocols, and the US Treasury Department’s decision has privacy advocates very worried. Most importantly, despite US sanctions and bans, mixing protocols are not going away.
What is mixer protocol?
First of all, it is important to remember: mixer protocols are services used to guarantee the anonymity of transactions on blockchains. For this, mixers mix cryptocurrencies to several people before sending them back to anonymous addresses. This step makes it extremely difficult to track cryptocurrencies, and thus the disappearance of cybercriminals.
Transactions are usually public on blockchains: if you know the address of a crypto wallet, it is quite possible to verify the ownership of the latter, as it is possible to see the transactions made in the past. With mixer protocols, everything becomes much more complicated, whether it’s spying on someone’s accounts or tracking down a cybercriminal.
In the case of Tornado Cash, the US Treasury Department accuses the platform of helping the North Korean hacking group Lazarus launder $455 million. That’s not all: the US agency also accuses him of allowing the laundering of 96 million dollars after the hacking of Harmony Bridge and 7.8 million after the hacking of the Nomad platform. Tornado was also talked about in April, during the hacking of the Beanstalk project, from which 182 million dollars were stolen. In all, the US Treasury Department estimates that Tornado has laundered $7 billion since its inception in 2019.
Ordinary users
But it’s not just illegal activity on the Tornado and Mixer protocols. The creators of the platform believe that a large part of their users are classic users, who have nothing to complain about. CoinDesk also explains that between May and June 2022, Tornado deposits exceeded 200,000 ETH – a total of between $200 billion and $600 billion. The $7 billion that the US Treasury Department accuses the platform of laundering since 2019 is therefore a very small part of its activity.
Moreover, immediately after the announcement of the US Treasury sanctions, many people rose up against the decision, criticizing the lack of respect for privacy. Others complained that part of their fund was frozen and The GitHub accounts of some Tornado contributors, including that of Roman Semenov, its founder, were even deleted.
However, it must be admitted that a significant part of Tornado users is engaged in money laundering. Analysts from Nansen, a consulting firm specializing in blockchain, estimate that in recent months almost 18% of the ETH in circulation in the mixer came from the hack of the Ronin platform, connected to the game Axie Infinity.
The US Treasury’s sanctions will therefore clearly affect hackers, who will certainly return to other tampering solutions. But in the end, it is mostly ordinary users who are likely to suffer the most from the condemnation of the US authorities.
Moreover, just because Tornado is sanctioned does not mean the end of mixing protocols. Before that, Blender.io was banned by the US Treasury Department in May, and in 2019 it was Europol that shut down Bestmixer.io. In 2021, US authorities arrested the founder of another mixer, Bitcoin Fog, for money laundering. Each time other sites took over.
