Some Democratic lawmakers in the United States are asking Treasury officials to explain the measures being taken against the banned Tornado Cash cryptocurrency mixing service, which was prohibited in 2022 but continues to operate.
"We write to request additional information regarding the use of the Tornado Cash cryptocurrency mixing service after the sanctions were imposed," lawmakers, including cryptocurrency critic Brad Sherman, said in a letter on November 14.
"Despite being sanctioned, Tornado Cash continues to operate online and functions as a decentralized smart contract," they added.
Lawmakers pointed out that there has been a "resurgence" in the use of mixers this year, with Tornado Cash receiving $1.8 billion in deposits in the first half of 2024, a 45% increase compared to the entire year of 2023, and added that:
"This issue shows no signs of disappearing in the near future."
Lawmakers listed a series of examples of Tornado Cash being linked to providing mixing services for illegal nations, terrorist organizations, and cybercriminals before requesting more information from the Treasury Department about what is being done regarding this issue.
Screenshot from the letter sent to the Treasury Department. Source: Sean Casten
Tornado Cash was sanctioned in August 2022 for helping to launder over $7 billion in cryptocurrency, including assets stolen by hacker groups linked to North Korea.
The letter indicates that, unlike centralized mixers punished like Blender and Sinbad, Tornado Cash continues to operate due to its decentralization.
They requested the agency to provide estimates of illegal activity through Tornado Cash since being sanctioned and details on enforcement actions against users and exchanges that have used this service.
They also requested reports of suspicious activity and statistics, asking whether the Treasury Department is considering potential secondary sanctions against non-U.S. individuals and exchanges that have interacted with mixing funds.
There is a request for a timeline for new regulations, such as when the Financial Crimes Enforcement Network (FinCEN) expects to complete the Proposed Regulation Notice requiring financial agencies to keep records of transactions related to cryptocurrency mixers.
Lawmakers asked whether the Treasury Department has sufficient enforcement tools and requested a response as well as staff presentation on December 2, 2024.
There is also a pending case where cryptocurrency privacy advocates are challenging the Treasury Department's sanctions, arguing whether decentralized services can be considered a legitimate "entity" for sanction purposes.
Earlier this month, a district judge pushed back the trial regarding money laundering and sanction violations of Tornado Cash co-founder, Roman Storm, to April 2025. Storm was arrested and charged in 2023.
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