Dune Analytics, a crypto data aggregator, reported that Circle, the USD Coin stablecoin issuer (USDC), frozen over 75,000 USDC of funds linked with the 44 Tornado Cash addresses approved by the U.S. Office of Foreign Assets Control (OFAC), Specially Designated Nationals and Blocked Persons list (SDN). Tornado Cash, also known as a dApp or decentralized application, is used to hide the history of cryptocurrency transactions on the Ethereum Blockchain.
All U.S. entities and persons are forbidden from interfacing with the virtual currency mixer’s USDC or Ethereum smart contract addresses on SDN. For willful noncompliance, penalties can include fines up to $50,000 and 10- to 30-year imprisonment. Assets worth $437 million, including stablecoins and Ethereum, are currently stored at Tornado Cash smart contract addresses. Issuers will take steps to stop the redemption or transaction of these assets.
Tether and USDC can both freeze stablecoin transfers from Tornado Cash at the Ethereum smart contract level. BitGo, Palo Alto, California based, would theoretically also need to limit Tornado Cash access in order to comply with these sanctions. One option is to suspend the redemption of Tornado Cash linked wBTC.
According to @BowTiedIguana (DeFi educator), the new Tornado cash sanctions are applicable to all U.S. citizens and entities. Simple interactions such as Gitcoin donations, working for the project, running or downloading its software, visiting its website, and depositing/withdrawing from smart contracts could be interpreted as violations.
Circle has frozen 75,000 USDC belonging unwitting Tornado users as well as 149 USDC donated for the project. pic.twitter.com/GBS41FtZvB
— banteg (@bantg), August 8, 2022