What is Tornado Cash
Tornado cash (TORN), is an non-custodial privacy system that’s built on Ethereum. Tornado Cash, which was created using open source research by Zcash (a privacy coin), allows users to send Ethereum and ERC-20 funds through its smart contract service.
You can withdraw your crypto via a new address once you have sent Tornado Cash an ETH/ERC-20 deposit. The asset can only be withdrawn from the new address once it has been deposited. This ensures asset privacy.
Tokens of the ERC-20 protocol with fixed supply, the TORN token allows holders to vote for and make proposals. As they interact with Tornado Cash, users of Tornado Cash accumulate Anonymity Points. These points are then deposited to a protected account. They can convert enough Anonymity points into TORN tokens if they accumulate enough.
Recently hacked on exchanges hot wallets hackers use tornado cash for transfers the funds and make all transaction Non -Traceable.
How Tornado Cash Works ?
Tornado Cash transactions can be mixed with zero knowledge proofs which completely obscure the transaction information. Tornado Cash is a decentralized service. It is managed through smart contracts. This means that no third party can have custody of funds during the mixing process.
Tornado Cash acts as a proxy to keep transactions anonymous using zk–SNARK proofs. This is short for zero-knowledge succinct, non-interactive argument or knowledge.
A Tornado smart contract user can deposit ETH to generate a secret. They also send a hash (or a commitment) with the amount of the smart contract.
The smart contract will add the funds to its deposit list. When the user wishes to withdraw, he or she must provide the secret key that matches the Tornado Cash deposit list.
Why the SEC Department Backlists the Tornado Cash ?
The Treasury Department has placed sanctions on Tornado Cash, a virtual currency mixer that allegedly helped to launder virtual currency worth more than $7B since its inception in 2019.
They also stated that Treasury’s Office of Foreign Assets Control said Tornado Cash’s systems had been used to launder more $96 million from the June Harmony crypto-firm heist and bridge theft of blockchains.
Antony Blinken, Secretary of State, stated in a statement that the U.S. will continue to pursue actions against “mixers laundering virtual currency for criminals” and those who help them.
These new sanctions highlight the increasing use of digital assets by individuals and state actors to support illegal acts. Administration officials and lawmakers expressed concern about cryptocurrency being used to commit illicit acts.
Blinken stated that the United States would not hesitate to use its authority against malicious cyber actors to expose, disrupt and promote accountability for criminal enablers and perpetrators.
Monday’s actions were the second-ever set to impose sanctions on a digital currency blending company.
The U.S. accuses Tornado Cash, the North Korean cyber hacking organization sanctioned by the United States, of helping to launder part of the $600 million Lazarus Group stole in one of the most significant virtual currency heists.
The U.S. announced sanctions in May against Blender.io, a North Korean digital currency mix firm. It was accused of aiding Lazarus Group in the March digital currency heist.
While the government claims that Tornado Cash has laundered approximately $7 billion, Tom Robinson (co-founder of Elliptic), a blockchain analysis company, believes that Tornado Cash may have laundered at least $1.5 million.
Robinson stated that “it should not be forgotten that mixers like Tornado can legitimately be used to protect financial privacy.”
“Tornado cash has failed repeatedly to impose effective control measures designed to prevent it from laundering funds for malignant cyber actors on an ongoing basis and without basic steps to address its risks,” stated Brian Nelson, Treasury’s Undersecretary for Terrorism and Financial Intelligence.
He stated that the agency would continue to pursue aggressively actions against “mixers that launder virtual currencies for criminals and their aid.”
In March, President Joe Biden issued an executive directive on digital assets. It called for federal regulators in order to reduce the risk of illicit finance and national security threats posed by digital asset misuse.
These are also may be the reason of Banning privacy coins & these actions may be just starting for Such type of Privacy Based cryptocurrency’s .