2024

DeFi

April

Tornado Cash

Tornado

Chainalysis data has uncovered a significant decline in Tornado Cash inflows following the imposition of sanctions. The statistics indicate a staggering 93% decrease in monthly inflows compared to the averages before the sanctions were enforced.&nbsp;
This revelation sheds light on the impact of regulatory measures on decentralized financial platforms like Tornado Cash, which provide privacy services through cryptographic methods. The implications of such a drastic reduction in inflows post-sanctions raise questions about the effectiveness of regulatory actions in the crypto space and the adaptability of privacy-focused projects to evolving compliance requirements.
<h2 class="wp-block-heading" id="tornado-cash-takes-a-nosedive">Tornado Cash takes a nosedive</h2>
Tornado Cash, an infamous coin mixer, suffered a significant setback after the Lazarus Group was sanctioned in August 2022 for laundering over $455 million in stolen crypto assets. Despite OFAC’s delisting and redesignation in November, its decentralized structure made it resistant to physical shutdowns.
Chainalysis data shows a 93% decline in monthly inflows following the sanctions compared to pre-sanctions trends.
According to the blockchain intelligence firm’s most recent statistics, Tornado Cash inflows have increased by 28% to $822 million since the OFAC sanctions were imposed. However, compared to the pre-sanctions era, inflows have plummeted by 89.2%, indicating the impact.
The number of unlawful transactions related to sanctions has significantly increased in recent years. This is due to the increased number of sanctioned entities, as well as the difficulty in enforcing them on entities in locations that do not respect OFAC’s standards or on decentralized operations.
“It’s still worth watching Tornado Cash as its continued activity in the last year highlights the challenge of enforcing sanctions on decentralized entities while also demonstrating the efficacy of sanctions and reinforcing the need for regulation in the DeFi ecosystem.”
In 2023, the OFAC levied 18 sanctions on organizations that use crypto addresses. Chainalysis found crypto addresses associated with OFAC-designated entities, including Trickbot ransomware gang members. They got 61.5% of the illegal transaction volume, which totaled $14.9 billion last year.
At least nine of the new sanctions targeted individuals and businesses in China and Latin America for their suspected involvement in fentanyl production and trafficking. Meanwhile, five of the sanctions targeted businesses that were found to have breached North Korean sanctions.
Unlike in 2022, OFAC primarily targeted groups and people in 2023, with the exception of Genesis Market and Sinbad.io. Previous sanctions in 2022 targeted key services such as Garantex, Hydra, Tornado Cash, and Blender.io, reflecting a shift in OFAC’s crypto-related priorities.
<h2 class="wp-block-heading" id="the-2024-crypto-crime-report">The 2024 Crypto Crime Report</h2>
Sanctioned entities, such as those tied to North Korean hacking groups and US-designated terrorist organizations like Lebanon’s Hezbollah, continue to raise funds using cryptocurrencies.
While last year’s numbers are down from the previous year, Chainalysis found that a far higher proportion of the payments were ascribed to sanctioned or terrorist-linked beneficiaries, accounting for around 61.5% of overall illicit transaction volume in 2023.
“Actors subject to sanctions are often cut off from international traditional financial systems, and crypto can become an attempted alternative mechanism to store, send, and receive funds,” Andrew Fierman, head of sanctions strategy at Chainalysis, told <a href="https://www.nbcnewyork.com/news/business/money-report/over-60-of-illegal-crypto-activity-is-tied-to-sanctioned-groups-or-terrorist-organizations-report-finds/5181313/" rel="noopener noreferrer nofollow" target="_blank">CNBC</a> on Thursday.
In 2023, entities such as the cryptocurrency “mixer” Tornado Cash and Garantex received the majority of criminal funds. Tornado Cash was sanctioned in August 2022 for its role in laundering crypto stolen by the North Korean hacking group Lazarus Group. Garantex, a Russian-based exchange, was sanctioned in April 2022 for its links to criminal organizations, including ransomware outfits.
Crypto mixers are software that conceal the history and origin of digital assets transmitted through them. The amount of crypto transferred to sanctioned businesses has increased in recent years, along with a growing proportion of new trade prohibitions targeting crypto wallets.
The top crypto recipient added to the sanctions list last year was Sinbad.io, a bitcoin mixer that was shut down in November 2023 after receiving $665.4 million in cryptocurrency from the Lazarus Group.
Nonetheless, sanctions have demonstrated the potential to impede the flow of cryptocurrency funds to their targets. Tornado Cash’s monthly inflows decreased by up to 93% shortly after being added to the U.S. list, according to Chainalysis. Despite this, the firm noticed that inflows gradually recovered from their low in the following months.
Iran was a big recipient of illegal cash among sanctioned nations, accounting for 73.3% of inflows from international mainstream exchanges, implying that the services might be used to circumvent sanctions, according to Chainalysis.

Tornado Cash traffic tanks 93% in the wake of sanctions, Chainalysis data shows

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