Sanctions on cryptocurrency mixer Tornado Cash have left a vacuum for illicit money mixing services, but it will take more time before we understand the full impact, according to Chainalysis’s chief scientist.
In a presentation of Chainalysis’s recently launched blockchain analytics platform Storyline, Cointelegraph asked Chainalysis Chief Scientist Jacon Illum and Australia and New Zealand Country Manager Todd Lenfield about the impact of the Tornado Cash ban.
While there are still some uses for mixers, Illum said it will take more time to “understand what’s going on” and “how the world is responding to that designation,” adding that people are trying to figure out how cryptographic mixers work right now. How to go:
“People are getting more cautious in this space and don’t know how to interact with Tornado Cash, and we’ve seen deposits for services that offer similar activities drop at least temporarily as people weigh ‘what does this mean to me?'”
But where others see obstacles, some clearly see opportunity, and Illum notes that a group of people he calls “junior mixers” have popped up hoping to profit from the void left by Tornado Cash.
an august Report In the first half of 2022, 74.6 percent of stolen funds on the Ethereum (ETH) network were transferred to Tornado Cash, totaling more than 300,000 ETH, or roughly $380 million, according to blockchain security firm SlowMist.
The 30-day moving average of the total daily value received by cryptocurrency mixers reached an all-time high of $51.8 million in April, according to Chainalysis.
“If you don’t have liquidity, you actually run out a lot [a mixers] ability,” Renfield added.
“Looking for places where there is liquidity, and when it became very apparent after OFAC sanctioned Tornado Cash, I thought it was a very interesting space to focus on.”
Tornado Cash was sanctioned by the U.S. Treasury on Aug. 8, meaning criminal or civil penalties could be imposed on U.S. citizens or entities that interact with the mixer. More than 40 cryptocurrency addresses allegedly related to Tornado Cash have been added to the Office of Foreign Assets Control (OFAC) list of Specially Designated Nationals.
related: Tornado Cash is the latest chapter in the anti-crypto war
When asked how sophisticated law enforcement agencies are in dealing with crypto-related crimes, Illum mentioned that one of the biggest gaps in law enforcement right now is blockchain-related training.
“As [blockchain] With adoption, more people are exposed to encryption, which means more agents or law enforcement officers who also need to be exposed to encryption. “
Lenfield noted that authorities are starting to build capacity around cryptocurrencies, citing the recent creation of a cryptocurrency unit by the Australian Federal Police (AFP) focused on monitoring crypto transactions.
“It’s active in their minds, they’re setting goals, and they’re working on it … but in any way, there’s a learning curve to get them there, but these institutions are 100 percent known and developed in this space.”
In early September, the Chainalysis Crypto Incident Response Team helped law enforcement recover $30 million in cryptocurrency stolen in the Ronin Bridge hack of the North Korea-linked Lazarus Group, which used Tornado Cash to launder the stolen assets.