In April 2023, Dutch authorities transferred Ethereum mixer Tornado Cash developer Alexei P. to house arrest. Despite requests from the community, the US Department of Treasury never removed the project from the sanctions lists.
However, similar measures cannot be applied to Bitcoin tumblers.
The authorities’ claims against Tornado Cash are based on evidence of $7bn in cryptocurrency laundering. However, such services cannot, in principle, filter incoming transactions:
“AML scoring defeats the purpose of mixers – to ensure user anonymity. In addition, no service can undo incoming transactions – the risk of receiving dirty cryptocurrency remains. That said, most of these coins are not sent by hackers, but by people who bought coins from unscrupulous exchanges”.Authorities said
Several types of sanctions are used to block Tornado Cash: restricting access to the site, blacklisting smart contract addresses on SDN, freezing addresses by token issuers, and removing repositories from GitHub.
Removing code from GitHub is the most exciting sanction. Regulators were trying to prevent the creation of counterparts. But two weeks later, other users re-uploaded the code to the service.
SDN (Specially Designated Nationals List) blacklisting only works for Ethereum smart contract-based mixers. Bitcoin-mixing services often generate new addresses for each transaction, which cannot be entered into any registry. Blocking the site threatens to lose the interface to the bitcoin-mixer, but the latter can provide it in other ways. For example, most of crypto tumblers have mirror on the Tor network. Account freezing does not apply to Bitcoin, a network with no centralized coin issuers.