Sanctions against cryptocurrency mixer Tornado Cash have left a vacuum for illicit funds mixing services, but more time is needed before the full impact is known, according to Chainalysis’ chief scientist.
During a demo of Chainalysis’ recently launched Storyline blockchain analytics platform, Cointelegraph interviewed Chainalysis Chief Scientist Jacon Illum and Country Manager for Australia and New Zealand Todd Lenfield , on the impact of the Tornado Cash ban.
Illum said while there is still some use of the blender, more time is needed to ‘see what’s going on’ and how the ‘world reacts to this designation’, adding that people are trying to figure out what to do now that the crypto mixer is effectively gone:
“People are becoming more cautious in the space and unsure how to interact with Tornado Cash, we have seen deposits in services providing similar activity decrease at least temporarily, because people are asking ‘what is does that mean to me?’ ”
But, where others see obstacles, some clearly see opportunity, Illum noted that a crop of what he calls “junior mixers” have emerged looking to cash in on the void left by Tornado Cash.
An August report from blockchain security firm SlowMist said that 74.6% of funds stolen from the Ethereum (ETH) network were transferred to Tornado Cash in the first half of 2022, a sum of more than 300,000 ETH. , or about $380 million.
Data from Chainalysis showed that the 30-day moving average of total daily value received by crypto mixers hit a new all-time high of $51.8 million in April.
“If there’s no cash, you’re effectively drying up a lot of [a mixers] capacity,” added Lenfield.
“The hunt for where there is liquidity, when it’s very visible after things like OFAC sanctioning Tornado Cash, I think is a very interesting space to watch.”
Tornado Money was sanctioned by the United States Treasury Department on August 8, which means that criminal or civil penalties could be imposed on US citizens or entities who interact with the mixer. More than 40 cryptocurrency addresses allegedly connected to Tornado Cash have been added to the Office of Foreign Asset Control’s (OFAC) Specially Designated Nationals list.
Related: Tornado Cash is the final chapter in the war on crypto
Asked about the level of sophistication law enforcement has in dealing with crypto-related crime, Illum mentioned that one of the biggest gaps in law enforcement today is the blockchain-related training.
“As [blockchain] gaining adoption, there are more people who are exposed to crypto, which also means there are more officers or law enforcement personnel who need to be exposed to crypto as well.
Lenfield noted that authorities are beginning to develop capabilities around cryptocurrencies, citing the recent establishment by the Australian Federal Police (AFP) of a cryptocurrency unit focused on monitoring crypto transactions.
“It’s active in their minds, they set goals and they work on them…but like in every aspect, there’s this learning curve to get them there, but there’s 100% visibility and of development in this space by these agencies.”
Earlier in September, the Chainalysis Crypto Incident Response team helped law enforcement recover $30 million in crypto stolen in the Ronin Bridge hack by North Korea-linked Lazarus Group that used Tornado Cash to launder stolen assets.