March 2, 2024

The U.S. Department of Treasury published guidelines on how users of the now-banned crypto mixer Tornado Cash can withdraw their assets.  

The Treasury blacklisted and added the Ethereum (ETH)-based software to the Specially Designated Nationals list on Aug. 8, citing a national security issue. This list contains individuals, entities, and crypto addresses that U.S. citizens are prohibited from using. Tornado Cash users have been unable to access the assets on the platform and any Ethereum wallet that has engaged with the service.

Guidelines on redemption

The Office of Foreign Assets Control has published a set of rules today that outlines how U.S. users can redeem their assets on Tornado Cash. Only the assets involved in transactions before Aug. 8 and not involved in “sanctionable conduct” can be withdrawn. 

Users will have to request a specific license from OFAC. They will also have to provide wallet addresses for the remitter and beneficiary, transaction hashes, the date and time of the transaction(s), and the number of digital assets, the guidelines say. 

OFAC further explains that no action can be taken on the platform anymore for U.S. citizens. “If U.S. persons were to initiate or otherwise engage in a transaction with Tornado Cash, including or through one of its wallet addresses, such a transaction would violate U.S. sanctions prohibitions, unless exempt or authorized by OFAC.”

The ban on the crypto mixer has attracted a lot of criticism from the crypto community. Coin Center, a non-profit organization aimed at shaping and incentivizing a conversation about policies related to cryptocurrencies, conducted an analysis following the Treasury’s decision.

Based on the analysis, Coin Center  concluded that the governmental agency “overstepped its legal authority” and “has not adequately acted to mitigate the foreseeable impact its action would have on innocent Americans.” The organization added that they planned to start a discussion about the issue with regulators and are even considering taking this case to court. 

Meanwhile, Coinbase, one of the leading crypto exchanges in the world, decided to foot the bill of the lawsuit filed against the Department. The Exchange believes that this ban represents a potential threat to tech platforms, and regulators should develop an appropriate legal framework.

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