U.S. Treasury addresses concerns related to Tornado Cash ban

The United States Department of the Treasury has addressed concerns regarding OFAC’s controversial sanction on mixing protocol Tornado Cash. The Federal body published a guide related to the sanction on its frequently asked questions (FAQ) pages on Tuesday.

The Treasury answered the questions of whether citizens are allowed to use Tornado Cash’s open-source code and if the mixer’s users can access their funds in the future.

According to the U.S. Treasure, copying the protocol’s open source code or publishing the code on another medium does not violate the sanction. It explains that users can interact with the code as long as they do not conduct prohibited transactions because OFAC has “a favorable licensing policy” towards applications like Tornado Cash.

“U.S. persons would not be prohibited by U.S. sanctions regulations from visiting the Internet archives for the Tornado Cash historical website, nor would they be prohibited from visiting the Tornado Cash website if it again becomes active on the Internet,” the Treasury writes.

In the guide, the Treasury discusses how Tornado Cash users can recover their funds. Anyone who deposited their money into Tornado Cash before August 8 can legally withdraw it. Users are required to apply for a license from OFAC to make the transaction.

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The Treasury also says that any American “nonconsensually” sending a small amount of money linked to Tornado Cash’s banned addresses will not be punished by the law. It says the current priority is not to enforce the ban against individuals. However, the body does not specify the maximum amount of transactions considered acceptable.

Tornado Cash ban

At the beginning of August, OFAC announced the ban on digital mixer Tornado Cash. This application helped users make transactions without disclosing their real addresses, improving the privacy of digital transactions.

OFAC’s reasoning behind the ban is that the mixer was misused by certain parties to conduct illegal transactions. In a statement, OFAC said that the digital mixer had been used “to launder greater than $7 billion price of digital foreign money since its creation in 2019.”

Many figures in the crypto community have voiced their concerns about the Tornado Cash sanction. Mythos Capital co-founder Ryan Adams called the sanction “an attack on crypto.”

DeFi Education Fund's Miller Whitehouse-Levine said the case was an “uncharted territory” as it marked the first time the government imposed a ban on an open-source app. Whitehouse-Levine said that there were broad “societal implications” caused by OFAC’s action.

Circle, for example, froze 75,000 USDC units linked to Tornado Cash addresses posted by OFAC. Prior to the ban, Circle CEO Jeremy Allaire said that the exchange was ready to block transactions whenever the action was “legally required.” GitHub also suspended the accounts of Tornado Cash’s developers and deleted the protocol’s code from its platform.

Several companies have decided not to implement the ban for the time being, including Tether. The USDT issuer confirmed that it would not freeze assets linked to Tornado Cash addresses if they did not get specific instructions from the U.S. authorities.

Meanwhile, other companies reportedly did not know whether to comply with OFAC’s sanction. Some renowned DeFi projects had implemented the ban on their platforms but eventually revoked the decision.