On the 8th of August, the U.S. OFAC sanctioned Tornado Cash based on fund laundering. The cryptocurrency community reacted angrily to this action, raising questions varying from if the protocol could be penalized to how those using Tornado Cash for lawful reasons might get back money frozen in the protocol’s smart wallets.
Recently, the department has offered a means of retrieving funds frozen in Tornado Cash. Citizens are to ask for a permit to obtain the money; an OFAC license.
Concerning getting this license, citizens residing in the U.S. would be ready to have, at a minimal level, every pertinent data relating to such operations about Tornado Cash, which includes the wallet addresses for the sender and recipient, transaction hashes, the day and period of activities, including the sum of cryptocurrencies.
Furthermore, if transactions are not accompanied by any additional sanctionable conduct, OFAC would maintain a friendly licensing stance toward these applications.
The North Korean government was allegedly being financially supported by Tornado Cash. Not only were they stealing cryptocurrency, but they were also funding the development of weapons. Therefore, the United States OFAC took action to curb it.
One caveat to the action is the whole decentralization scheme the protocol runs. In Tornado Cash, holders have access to governance. Sanctions do not necessarily stop their activities, especially if they are not from the United States.
Since the launch of Tornado Cash, about $7 billion has flowed through the platform. Estimates show that about $5 billion has been legal and about $1.5 billion illegal. The sanction is a massive blow for those who use the platform for legal activities. Therefore, although solutions are available to retrieve money in Tornado Cash, holders have tagged the sanction as an attack on privacy.
