What’s next for Tornado Cash?

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August 12, 2022

As crypto enthusiasts begin to think that the market situation is starting to stabilize, new problems and signs of a crypto winter appear. So, recently everyone has been actively discussing the events around Tornado Cash. Earlier, the US government imposed sanctions on this, and today, one of this mixer’s developers was detained.

Details

In Amsterdam, one of the creators of Tornado Cash was detained on suspicion of money laundering on a vast scale and hiding transactions that went through the mixer. The identity has not yet been released, but the media reports that this may be Alexey Pertsev, but this information needs to be confirmed.

Thus, crypto companies in the EU countries must know their customers and verify all data to prevent fraud. The mixer, on the contrary, will allow you to conduct financial transactions anonymously. So, in June of this year, law enforcement agencies in the Netherlands launched a criminal investigation into Tornado Cash.

According to law enforcement, attackers used this to anonymously carry out transactions with cryptocurrencies obtained illegally (crypto wallet hacking and fraud). It is also noted that most decentralized organizations are engaged in similar activities.

It is not the only trouble that has recently happened to Tornado Cash. So, on August 8, US sanctions were imposed on this. According to state authorities, more than 7 billion USD have passed through this protocol since 2019. Circle subsequently blacklisted Tornado Cash USDC wallet addresses following the sanctions. Infura and Alchemy infrastructure platforms have limited RPC requests to Tornado Cash. The DEX dYdX has suspended the accounts of all users who previously used this mixer to encrypt their data.

According to some reports, after the imposition of sanctions, money through this protocol decreased by almost 79% due to such actions. So, over the past week, only 6 million US dollars of cryptocurrencies have passed through this, which is 4.5 times less than in the same period last week.

In addition, users began to actively withdraw money from their accounts, which decreased the service’s assets by 15%. It is expected that in the coming week, this figure will become even higher.

What is the future of Tornado Cash?

Many experts agree that Tornado Cash will experience a significant collapse shortly. If this does not change its policy, this protocol may soon completely exhaust its own and add to the list of bankruptcies this year.

Of course, this has enough assets to keep afloat for some time, but their supply will quickly be depleted without the necessary investments and cancellations of account blocking.

Thus, the CEO and founder of the Swiss platform ShapeShift, Erik Voorhees, called on the MakerDAO community to immediately transfer funds from USDC to another stable cryptocurrency more resistant to censorship. It is worth saying that the USDC stablecoin began to enjoy great popularity in the US after the events with USDT (another dollar-pegged stablecoin). However, he later said that the collapse of Tornado Cash should not negatively affect this or any other stablecoins.

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