By outlawing the Ethereum-based mixer Torando Cash (TORN) on August 8, the U.S. Department of Treasury made it the first smart contract to receive official U.S. government sanction.
The first Smart Contract to be christened by a Federal Sanction is Tornado Cash (TORN).
The Ban was issued on August 8, 2022. According to CommerceBlock’s Privacy Pioneer CEO, Nicholas Gregory, “The ban on tornado cash makes little sense.”
The U.S. Government decided that to prevent North Korean criminals from laundering money, they needed to Ban Tornado Cash.
The U.S. Government issued the Ban through the Department of Treasury by publishing a list of 6 USDC addresses and 39 other Ethereum associated with Tornado Cash.
Also added to this by the Office of Foreign Asset Control (OFAC) are another 45 addresses to its specially designated nationals and blocked persons (SDN) list.
This Ban is applicable and enforceable to all American citizens and registered companies.
Nicholas Gregory believes this move does little if not anything to hinder crime from happening or securing the privacy of accounts.
He also emphasized that this Ban is symbolic and critical because it is the first Ban ever issued against a smart contract.
In the simplest terms, the mixer protocol collects funds and mixes them before sending the fund to the receiving address. It practically makes it almost impossible to match the sending and receiving addresses.
Tornado Cash, so far, is a common denominator in the recent attacks on Axie Infinity, Ronin Bridge, North Korea’s Lazarus Group, and also, not to miss out, Beanstalk and DAO.
All these have been associated with Tornado Cash, giving us a particular favorite amongst hackers. The second quarter of this year, 2022, is around $600 Million has been reported to have been laundered from North Korea.
A source from the Department of Treasury says they have been working closely with The Federal Bureau of Investigation to investigate the Lazarus Group in April 2022.
As more engagement happens between mainstream processes and the crypto universe, we will encounter more of these scenarios.
Hopefully, more regulators and developers will be able to work with each other to improve the integrity of the system.
Being decentralized sometimes became insulated from regulators but not hackers and fraudulent actors in the ecosystem.
Decentralized systems should be able to address this critical concern so that hackers and attacks can be addressed before any clueless government steps in and completely ban this system.