The recent sanctions imposed on Tornado Cash, a cryptocurrency mixer, have created a void for illicit fund mixing services. However, it will take more time to fully understand the impact of these sanctions, according to Jacob Illum, the chief scientist at Chainalysis.
During a demonstration of Chainalysis’ new blockchain analysis platform, Storyline, Cointelegraph spoke to Illum and Todd Lenfield, the country manager for Australia and New Zealand, about the consequences of the Tornado Cash ban.
Illum explained that although some people are still using the mixer, it will take time to observe the developments and see how the world responds to the ban. He also mentioned that people are currently trying to figure out alternative solutions now that the crypto mixer is no longer available.
While some view the sanctions as obstacles, others see them as opportunities. Illum noted that a new wave of “junior mixers” has emerged, seeking to take advantage of the gap left by Tornado Cash.
According to a report by blockchain security firm SlowMist, 74.6% of stolen funds on the Ethereum network in the first half of 2022 were transferred to Tornado Cash, totaling over 300,000 Ether (ETH), equivalent to approximately $380 million.
Data from Chainalysis revealed that the total daily value received by crypto mixers reached a record high of $51.8 million in April, based on a 30-day moving average.
Lenfield added that if liquidity is not available, it significantly hampers the capability of mixers.
Tornado Cash was sanctioned by the United States Treasury Department on August 8, which means that U.S. citizens or entities who interact with the mixer could face criminal or civil penalties. Over 40 cryptocurrency addresses connected to Tornado Cash were included in the Specially Designated Nationals list of the Office of Foreign Asset Control (OFAC).
When asked about the level of expertise that law enforcement agencies have in dealing with crypto-related crimes, Illum highlighted that one of the major gaps in law enforcement is the lack of blockchain-related training.
Lenfield mentioned that authorities are starting to develop capabilities in dealing with cryptocurrencies, citing the recent establishment of a cryptocurrency unit by the Australian Federal Police (AFP) to monitor crypto transactions.
In September, Chainalysis’ Crypto Incident Response team assisted law enforcement in recovering $30 million in crypto that was stolen in the Ronin Bridge hack by the Lazarus Group, a North Korean-linked cybercrime organization that used Tornado Cash to launder the stolen assets.