Bans on cryptocurrency mixer Tornado Cash have left a void for illegal fund-mixing services, but more time is needed before we know the full impact, according to the chief scientist at ChannelAlysis.
During a demo of Chainalysis’ recently launched blockchain analytics platform Storyline, Cointelegraph asked Chainalysis Chief Scientist Jackon Elam and Australia and New Zealand Country Manager Todd Lanefield about the impact of the Tornado Cash ban.
Elam said that while there are still some uses for Mixer, more time was needed to “see what’s going on” and how “the world responds to that designation,” adding that people are now trying to figure out what Crypto Mixer is supposed to do effectively. All Owned:
“As people become more cautious in the space and unsure of how to approach Tornado Cash, we’ve seen deposits on services that offer similar activity drop off, at least temporarily, as people gauge ‘What does this mean for me?’ “
But, while others see obstacles, some clearly see opportunities, with Elam noting that he has raised a crop of “junior mixers” that seek to fill the void left by Tornado Cash.
an august Report Blockchain security firm Slomist reported that 74.6% of funds stolen on the Ethereum (ETH) network in the first half of 2022 were transferred to Tornado Cash, amounting to 300,000 ETH, about $380 million.
The 30-day moving average of the total daily value received by crypto mixers reached a new all-time high of $51.8 million in April, data from Chainanalysis showed.
“If there is no liquidity, you are effectively very dry [a mixers] power,” Lanefield added.
“Looking for places where there’s liquidity, when it’s highly visible after things like the OFAC approval of Tornado Cash, I think that makes it a very interesting space to keep an eye on.”
Tornado Cash was approved by the US Treasury Department on August 8, meaning that criminal or civil penalties could be brought against US citizens or entities that interact with Mixer. More than 40 cryptocurrency addresses linked to Tornado Cash have been added to the Office of Foreign Assets Control’s (OFAC) list of Specially Designated Nationals.
Related: Tornado Cash is the latest chapter in the war against encryption
When asked about the level of sophistication of law enforcement agencies in dealing with crypto-related crimes, Illum noted that one of the biggest gaps in law enforcement right now is blockchain-related training.
“For example [blockchain] As adoption gains, there are more people who are exposed to crypto, which means more agents or law enforcement personnel who need to have exposure to crypto as well.”
Lanefield noted that authorities have begun building capabilities around cryptocurrencies, with the Australian Federal Police (AFP) recently establishing a cryptocurrency unit focused on monitoring crypto transactions.
“It’s active in their minds, they’re setting goals, and they’re working through it…but as with any aspect, they have a learning curve to get there, but there’s 100% visibility and development in this space by these organizations.”
In early September, the Chainalysis Crypto Incident Response Team helped law enforcement recover $30 million in crypto stolen from the Ronin Bridge hack by the North Korean-linked Lazarus Group who used Tornado Cash to launder the stolen assets.