Sanctions on cryptocurrency mixer Tornado Cash have left a vacuum for illegal fund mixing services, but more time is needed before we know the full impact, according to Chainalysis’ chief scientist.
During a demonstration of the company’s recently launched blockchain analytics platform Chainalysis Storyline, Cointelegraph asked Chainalysis Chief Scientist Jacon Illum and Australia and New Zealand Country Manager Todd Lenfield to impact of Tornado Cash ban.
Illum said that while there is still some use for the blender, more time was needed to “see what’s going on” and how “the world reacts to this label,” adding that people are trying to figure out what to do now. cryptocurrency mixer is effectively gone:
“People are becoming more cautious in the space and unsure of how to interact with Tornado Cash, we’ve seen deposits to services that provide similar activity drop, at least temporarily, as people measure like ‘what does this mean for me?'”
But where others see obstacles, some clearly see opportunity, Illum has seen a slew of what he calls “junior mixes” emerge looking to capitalize on the void left by Tornado Cash.
August message security blockchain firm SlowMist reported 74.6% of stolen funds on Ethereum (ETH) networks were transferred to Tornado Cash in the first half of 2022, amounting to over 300,000 ETH, approximately $380 million.
Data from Chainalysis showed that the 30-day moving average of the total daily value received by cryptocurrency mixers hit a new all-time high of $51.8 million in April.
“If liquidity is not available, you effectively dry up a lot [a mixers] abilities,” added Lenfield.
“The hunt for places where there’s liquidity, when it’s very visible after things like the OFAC sanction on Tornado Cash, I think is a very interesting space to keep an eye on.”
Tornado cash has been sanctioned on August 8 by the United States Department of the Treasury, which means that criminal or civil penalties may be imposed against US citizens or entities that interact with the mixer. More than 40 cryptocurrency addresses allegedly linked to Tornado Cash have been added to the Office of Foreign Assets Control’s (OFAC) list of Specially Designated Nationals.
When asked about the level of sophistication law enforcement has in dealing with crypto-related crime, Illum cited one of the biggest gaps in law enforcement today, which is blockchain-related training.
“As [blockchain] gains acceptance, there are more people who are exposed to cryptocurrencies, which also means that there are more agents or law enforcement personnel who need to be exposed to cryptocurrencies as well.”
Lenfield noted that authorities are beginning to build capabilities around cryptocurrencies, citing recent reports from the Australian Federal Police (AFP). foundation of cryptocurrency unit focused on tracking crypto transactions.
“It’s active in their minds, they’re setting goals and working towards it…but like anything there’s a learning curve that gets them there, but these agencies are 100% visible in this space and growing.” .”
In early September, the Chainalysis Crypto Incident Response team assisted law enforcement get back $30 million in cryptocurrencies stolen in the Ronin Bridge hack by the North Korea-linked Lazarus group, which used Tornado Cash to launder the stolen assets.