According to cryptocurrency data aggregator Dune Analytics, on Monday Circle, the issuer of the USD Coin (USDC) stablecoin, froze more than 75,000 USDC of funds linked to the 44 Tornado Cash addresses sanctioned by the Specially Designated Nationals list and Blocked Persons (SDN) of the United States Office of Foreign Assets Control (OFAC). Tornado Cash is a decentralized application, or dApp, used to hide the trail of cryptocurrency transactions on the Ethereum network.
All US persons and entities are prohibited from interacting with the Ethereum and USDC smart contract addresses of the virtual currency mixer on the SDN list. Penalties for willful noncompliance can range from $50,000 to $10,000,000 in fines and 10 to 30 years in prison. It is estimated that there are $437 million worth of assets, consisting of stablecoins, Ethereum, and wrapped Bitcoin (wBTC), currently held at Tornado Cash smart contract addresses. As a result, issuers are expected to take steps to prevent the transaction or redemption of such assets.
Both the entities behind USDC and Tether can freeze your stablecoin transfers to and from Tornado Cash at the Ethereum smart contract level. For its part, BitGo, based in Palo Alto, California, would also theoretically need to restrict access to Tornado Cash to comply with such sanctions. One possible method is to suspend the redemption of Tornado Cash linked to wBTC.
Just like tells us DeFi educator, “BowTiedIguana”, the new sanctions against Tornado Cash are general in nature for US persons and entities. Simple interactions like Gitcoin donations, working for the project, running or downloading their software, visiting their website, and depositing/withdrawing into smart contracts could all be interpreted as violating sanctions.
Circle just frozen 75,000 USDC belonging to unsuspecting Tornado users, as well as 149 USDC donated to the project. pic.twitter.com/GBS41FtZvB
— banteg (@bantg) August 8, 2022
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