Authorities Say Users Need License to Retrieve Funds From Sanctioned Mixer
U.S. residents with crypto trapped on Tornado Cash may now apply for a license from the U.S. Treasury Department to retrieve their funds.
On Sep. 13, U.S. authorities published guidance about its sanctions of the crypto mixing service, Tornado Cash. Officials said that U.S. persons with assets deposited in the protocol can request a specific license from the Office of Foreign Assets Control (OFAC) to withdraw their funds.
Interacting With Code
Persons requesting a license must provide detailed information concerning the previous transactions involving Tornado Cash, including the wallet address, the date and time of the transaction, the sum of crypto assets sent to Tornado Cash, and previous transaction hashes.
The release also clarifies that while transacting via Tornado Cash is prohibited by the sanctions, interacting with the protocol’s underlying code is not.
“U.S. persons would not be prohibited by U.S. sanctions regulations from copying the open-source code and making it available online for others to view, as well as discussing, teaching about, or including open-source code in written publications,” the Treasury Department said.
The agency added that the sanctions would not restrict U.S. persons from visiting the Tornado Cash website if it again becomes active on the internet, nor are they restricted from visiting internet archives of the website.
The U.S. Treasury Department shocked the crypto sector when it added Tornado Cash to its list of Specially Designated Nationals on Aug. 8. The move made it illegal for U.S. persons to interact with wallets or contracts associated with Tornado Cash, and marked the first time OFAC included code on the SDN list.
Action Against Developers
The crypto community expressed outrage, arguing that code is speech and should be protected by the first amendment. The subsequent arrest of a Tornado Cash developer in the Netherlands suggested authorities were taking action against developers for working on the protocol’s code.
Jake Chervinsky, the head of policy at the Blockchain Association in Washington, argued that the lack of U.S. involvement in the arrest suggested the incident was likely unrelated to Tornado Cash.
The Treasury Department’s clarifications indicate that OFAC is not cracking down on open-source development, but rather is combating money laundering the proceeds from cybercrime.
The Treasury Department also said OFAC is aware of reports concerning unsolicited transactions sending small amounts of crypto assets to well-known wallets of celebrities and other prominent figures via Tornado Cash.
It said OFAC will not prioritize enforcement actions against such transactions provided they do not violate other sanctions in addition to Tornado Cash, even though “technically, OFAC’s regulations would apply to these transactions.”
CORRECTED on 9/14 @ 11am ET: Headline changed to reflect that crypto assets in Tornado are not frozen.