Tornado Cash Latest: Community Fights Back Against Sanctions, TVL Dropped 26% Since US Treasury Decision

An increasing number of crypto and privacy advocates are attempting to fight back against the United States Treasury's decision to ban the popular crypto mixing service Tornado Cash.

Most recently, the Electronic Frontier Foundation, a nonprofit organization defending civil liberties in the digital world, has expressed concern regarding the Treasury's sanctions against "an open source computer project."

"EFF is deeply concerned that the U.S. Treasury Department has included an open source computer project, Tornado Cash, on its list of sanctioned individuals," the EFF said on Twitter. "Tornado Cash is an open source software project and website that published a decentralized cryptocurrency mixer."

The digital rights organization claimed that, 

"Code has long been recognized as speech, so there are clear First Amendment implications whenever the government inhibits the publication of computer code on a public website."

The statement by the EFF comes as GitHub, a Git repository hosting service, suspended the account of Tornado Cash developer Roman Semenov in response to the sanctions and also removed the source code for Tornado Cash.

As reported, the US Treasury's Office of Foreign Assets Control (OFAC) has imposed sanctions on Tornado Cash on August 8 for its alleged role in money laundering operations.

Initially, some users noted that this move would only punish US users while real criminals can continue to use the mixing service. “This new legislation is only affecting Americans. It is a sanction *on Americans*, but not the alleged bad actors,” ETH advocate and software engineer Adriano Feria said several days ago, 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."

Furthermore, Coin Center, a crypto non-profit focused on the policy issues facing cryptocurrencies, has announced that it is preparing a court challenge to the ban on Tornado Cash.

Jerry Brito and Peter Van Valkenburgh, respectively Coin Center's executive director and director of research, wrote in an August 15 blog post that,

"By treating autonomous code as a 'person' OFAC exceeds its statutory authority." 

In the article, the duo mentioned that the crypto community didn't fight back when the Treasury sanctioned crypto mixer Blender, because it "is an entity that is ultimately under the control of certain individuals."

On the other hand, the authors claimed that the statement against Tornado Cash "does not make sense" because "it can’t be said that Tornado Cash is a person subject to sanctions," highlighting the contradiction of calling a smart contract a sanctionable entity.

Therefore, they wrote: 

"We intend to work with other digital rights advocates to pursue administrative relief. We are also now exploring bringing a challenge to this action in court."

Meanwhile, a recent report by Global Ledger, a Ukrainian start-up that helps identify the origins of Bitcoin (BTC) transactions and provides banks, crypto, and fintech companies with anti-money laundering (AML) compliance software, claimed that hackers are responsible for only a small percentage of Tornado Cash transactions.

After analyzing 181,164 transactions carried out in two TornadoCash proxy servers, the company "was able to directly trace the connection between specific cybercrime and TornadoCash in 7.73% of all these transactions," Global Ledger said in a report shared with Cryptonews.com.

Meanwhile, as worries surrounding Tornado Cash pile on, users continue to pull out their assets from the mixing service. Tornado Cash's total value locked (TVL), which stood at over USD 460.6m on August 8, has since plunged to USD 341.93m, according to DeFi Llama.

The increasing concerns have also pushed the signatories of Tornado Cash's multisignature community fund to disband their positions. Peer-elected members in charge of the fund have vacated their posts and handed control to the project’s decentralized autonomous organization (DAO).

Launched in 2021, the fund aimed to provide incentives to project contributors.