Tornado Cash’s USDC Frozen as Stablecoin Censorship Fears Grow
The US Treasury Department imposed sanctions on virtual currency mixer Tornado Cash yesterday, banning all Americans from interacting with the mixer. Subsequently, Circle, the issuer of the USD Coin (USDC), froze over 75,000 USDC linked to the sanctioned Tornado Cash addresses, a move that stirred up fears of stablecoin censorship in the crypto community.
Treasury Bans Americans From Using Tornado Cash
On Monday, the US Treasury announced sanctions against Tornado Cash, claiming that the mixer has been used to launder more than $7 billion worth of virtual currencies since its inception. The Office of Foreign Assets Control (OFAC), a watchdog agency tasked with preventing sanctions violations, also blacklisted the mixer.
Consequently, all Americans and US-based entities are barred from interacting with Tornado Cash or any of the Ethereum wallet addresses tied to the protocol. Those who fail to comply may face fines of $50,000 to $10,000,000 and 10 to 30 years imprisonment.
Tornado Cash is a crypto mixer that enables users to conceal the source of their crypto funds by blending potentially identifiable or tainted cryptocurrency funds with others, thus obfuscating the source and destination of crypto assets.
The Treasury Department claimed that Tornado Cash has been a key tool for hackers to launder money. Specifically, the Lazarus Group, a state-sponsored North Korean hacking group that is believed to be behind the $625 million March hack of Axie Infinity’s Ronin Network, has been using the mixer to launder stolen funds.
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Circle Freezes Addresses as Censorship Fears Rise
Following the sanctions by the Treasury against Tornado Cash, Circle, the entity behind popular stablecoin USDC, froze over $75,000 worth of funds linked to 81 sanctioned addresses, according to data from crypto aggregator Dune Analytics. Circle and Tether, the issuer of USDT, are able to freeze transfers of their stablecoins on the Ethereum smart contract level to and from Tornado Cash.
The move stirred up a wave of concern among crypto users. For one, Shapeshift CEO and founder Erik Voorhees recommended the MakerDAO community exchange their USDC collateral for a more “censorship resistant” stablecoin. “You have some time to do it, but you need to get started,” he said.
The drama even forced embattled Terraform Labs founder Do Kwon to break the silence. “Decentralized networks need decentralized money – obvious today more than ever,” he said in a tweet, claiming that the crypto world needs decentralized money.
“We need decentralized money. $ust was very important, too bad it wasn’t built on solid ground,” said THORmaximalist, the pseudonymous Terra validator who leaked the Telegram chats. “Having a decentralized stable should be a priority.”
Many other community members also mentioned that crypto needs decentralized money. “If $UST had been better designed (didn’t leak out so much of its treasury) and it managed to survive until today, this USDC/Tornado-freeze event would have been a rallying cry,” another user said.
Some users also criticized the latest sanctions, claiming that they only punish US users while real criminals can continue to use the mixer and launder money. “This new legislation is only affecting Americans. It is a sanction *on Americans*, but not the alleged bad actors,” one Twitter user said, adding:
“This was a political maneuver, orchestrated behind closed doors, that impacts individual freedoms from law abiding Americans, and which was done without prior notice or presenting clear evidence of the allegations. This is how authoritarians regimes look like under their phony mask of “democracy and individual freedoms.”
Do you think the crypto world needs decentralized stablecoin? Let us know in the comments below.