Due to the reasoning behind it as well as how it was executed, this has angered the crypto community and may be a precursor of a serious government crackdown on the industry.
Let’s look at the reasons behind the sanction and what it could signify for the future of decentralized finance.
What Is Tornado Cash?
Tornado Cash, launched in 2019, is one of the first fully decentralized apps on Ethereum to offer private transactions.
It accomplished this by first accepting user payments, combining them into a single address, and allowing users to withdraw funds to a second Ethereum address.
Due to the mixture of Ethereum addresses, it was impossible to determine who the original owner was.
Tornado Cash offered a way for people who valued their privacy to invest in and utilize cryptocurrencies without having their transactions automatically made public on Ethereum, which makes every transaction public by default.
Motives behind the sanction
With Tornado Cash’s assistance, more than $7 billion in user funds have already been mixed.
Despite the fact that the majority of these transactions were fully authentic and lawful, there have been some major hacks that have used the website to launder stolen money.
For instance, the Axie Infinity Ronin Bridge hack, which happened in April 2020 and saw the loss of more than $400 million in cryptocurrencies, was utilized to launder the money via Tornado Cash.
Additionally, money was laundered via the protocol as a result of both the Nomad assault and the Harmony Bridge hack.
To make matters worse, the FBI has determined that the Ronin and Harmony breach was carried out by the Lazarus Group, a North Korean organization that has been sanctioned since 2019.
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