The recent imposition of sanctions on cryptocurrency mixer Tornado Cash has created a void for illicit fund mixing services, but it will take more time to fully understand the impact, according to Jacob Illum, the chief scientist at Chainalysis. During a demonstration of Chainalysis’ blockchain analysis platform Storyline, Illum and Todd Lenfield, the country manager for Australia and New Zealand, discussed the consequences of the Tornado Cash ban. Illum explained that while some people are still using the mixer, it will require more time to observe the developments and see how the world reacts to its designation. He also noted that individuals are currently trying to determine what to do now that the crypto mixer is no longer available. However, Illum also mentioned that some individuals see this as an opportunity and a number of “junior mixers” have emerged, hoping to exploit the gap left by Tornado Cash. In a report by SlowMist, it was revealed that during the first half of 2022, 74.6% of stolen funds on the Ethereum network were transferred to Tornado Cash, amounting to over 300,000 Ether (ETH) or roughly $380 million. Chainalysis data indicated that the 30-day moving average of the total daily value received by crypto mixers reached a record high of $51.8 million in April. Lenfield added that if the liquidity is not available, it significantly restricts the capabilities of mixers. The United States Treasury Department sanctioned Tornado Cash on August 8, which means that U.S. citizens or entities that interact with the mixer could face criminal or civil penalties. Over 40 cryptocurrency addresses related to Tornado Cash were included in the Specially Designated Nationals list of the Office of Foreign Asset Control (OFAC). Illum also discussed the level of sophistication of law enforcement agencies in dealing with crypto-related crimes, stating that one of the major gaps at present is the lack of blockchain-related training. Lenfield highlighted that authorities are beginning to develop capabilities in relation to cryptocurrencies, citing the recent establishment of a cryptocurrency unit by the Australian Federal Police (AFP) to monitor crypto transactions. In September, Chainalysis’ Crypto Incident Response team assisted law enforcement in recovering $30 million in crypto that was stolen in the Ronin Bridge hack by the North Korean-linked Lazarus Group, who used Tornado Cash to launder the stolen assets.
Chainalysis Chief Scientist speculates on what will fill the void left by Tornado Cash