Cryptocurrency Companies Say US Sanctions Limit Use of Privacy Software

WASHINGTON (AP) – The Treasury Department is facing a backlash from the cryptocurrency industry over sanctions imposed on a company accused of helping to launder billions of dollars – with some funds going to North Korean hackers.

Earlier this month, the Treasury Department imposed sanctions on virtual currency mixing company Tornado Cash, which has allegedly helped launder over $7 billion in virtual currency since its inception in 2019.

Mixing services combine various digital assets, including potentially illegally and legitimately obtained funds, to keep the origins of funds secret, including money that has been stolen.

In the weeks after the sanctions were announced, cryptocurrency companies, lobbyists and at least one lawmaker came to the company’s defense, saying the sanctions open the door to limiting Americans’ use of privacy software.

Coin Center, a non-profit cryptocurrency defense firm, says the Treasury’s financial crime enforcement arm “overstepped its legal authority” through its sanctions, which “potentially violate constitutional rights to due process and liberty.” of expression”.

Cryptocurrency company Tether said it would not freeze your accounts linked to Tornado Cash and intends to keep them open. And Representative Tom Emmer (R-Minn.), who received at least $50,000 in contributions from the Blockchain Association this year, wrote Treasury Secretary Janet Yellen this week asking for justification for sanctioning Tornado Cash, saying the sanctions “impact not only our national security, but the right to privacy of every American citizen.”

He told the Associated Press that the sanctions punish Americans who use the company’s software for legitimate purposes. “My government has no right to sanction my ability to use software that protects my anonymity, especially when I use it for legitimate purposes,” he said.

The company’s defense comes when a Tornado Cash developer Alexey Pertsev was arrested by Dutch authorities in early August, days after the imposition of US sanctions, for allegedly facilitating money laundering.

The Treasury’s Office of Foreign Assets Control says Tornado Cash’s systems were used, among other things, to launder more than $96 million taken from the June Harmony blockchain bridge theft and August’s Nomad cryptocurrency heist. .

A Treasury spokesperson said the agency is focused on stopping criminal behavior and will use its sanctions authorities to protect the US financial system from illicit activities such as cyber theft, money laundering and financing of arms proliferation.

Kristin Smith, executive director of the Blockchain Association, said the sanctions affect users who comply with the cryptocurrency blending technology law.

“If you are paid in cryptocurrency, transactions on most blockchains are transparent,” she said, adding that the mixers are used by those who do not want their transactions to be viewed on a public ledger.

“I think we need to talk about privacy and empower law enforcement without harming people’s ability to transact privately,” Smith said.

this is not the first set of sanctions on a digital asset mixing company.

In May, the US announced sanctions against North Korean cryptocurrency mixing company Blender.io, accused of helping Lazarus Group, the North Korean sanctioned cyber-hacking group, carry out a $600 digital currency theft. million in March.

Since the Tornado Cash sanctions, crypto experts have speculated whether the expected regulations would result in a ban on mixing services.

The Biden administration issued an executive order on digital assets in March that requires, in part, industry regulations.

“This could be the end,” Smith said, “but we won’t know until we see the regulations.”

Learn more about cryptocurrency: https://apnews.com/hub/cryptocurrency