The OFAC Answers Questions About The Tornado Cash Sanctions, Uncertainty Remains

The Tornado Cash situation is a riddle wrapped up in an enigma. Why did the OFAC sanction a piece of software? And why did Dutch authorities arrest a sole developer? Those are not the question we’ll answer today. The OFAC updated the frequently asked questions on Tornado Cash-related matters. The answers focus on the details of the sanctions and not on the big questions.

We’ll take them, though. They’re entertaining and illuminating, just as the whole Tornado Cash situation is. 

The OFAC Clarifies Tornado Cash Sanctions

In yesterday’s update of the OFAC’s FAQ, Tornado Cash was the topic of choice. The US Government enabled a form to file licensing requests and announced that users can recover their funds :

“For transactions involving Tornado Cash that were initiated prior to its designation on August 8, 2022 but not completed by the date of designation, U.S. persons or persons conducting transactions within U.S. jurisdiction may request a specific license from OFAC to engage in transactions involving the subject virtual currency.  U.S. persons should be prepared to provide, at a minimum, all relevant information regarding these transactions with Tornado Cash, including the wallet addresses for the remitter and beneficiary, transaction hashes, the date and time of the transaction(s), as well as the amount(s) of virtual currency.”

So, there’s hope for frozen funds if the user is willing to go through a few hops and KYC-like procedures. It’s not perfect, but we’ll qualify the developments as good news. Another tidbit that seems like good news, the OFAC will not prioritize any procedures that have to do with dusting.

“OFAC is aware of reports following the designation of Tornado Cash that certain U.S. persons may have received unsolicited and nominal amounts of virtual currency or other virtual assets from Tornado Cash, a practice commonly referred to as “dusting.”  Technically, OFAC’s regulations would apply to these transactions.”

That’s all fine and dandy, however, dusting still casts a shadow over the whole operation. There’s no way of knowing if some accounts were dusted or if the owner took advantage of the situation to launder his or her Tornado Cash funds. Still, in some cases, the OFAC ignoring the dusting will save some wallets and accounts.

ETH price chart for 09/14/2022 on Gemini | Source: ETH/USD on TradingView.com
These Actions Aren’t Prohibited

Make no mistake, “U.S. persons are prohibited from engaging in transactions involving Tornado Cash, including through the virtual currency wallet addresses that OFAC has identified.” However, “interacting with open-source code itself, in a way that does not involve a prohibited transaction with Tornado Cash, is not prohibited.” This seems like a trivial matter, but it renders irrelevant some of the protests against the Tornado Cash sanctions:

“For example, U.S. persons would not be prohibited by U.S. sanctions regulations from copying the open-source code and making it available online for others to view, as well as discussing, teaching about, or including open-source code in written publications, such as textbooks, absent additional facts.  Similarly, 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.”

Is everything clear now? Not a chance. New questions about the sanctions keep emerging, the situation is more interesting than ever. And now, we know that all funds are not lost and that dusting will not be prosecuted. Why is the OFAC targeting a smart contract, though? The answer to that one isn’t clear yet. And neither is the reason for the lone developer’s arrest. 

Baby steps. 

Featured Image by larry from Pixabay | Charts by TradingView

Related Posts

Three Arrows Capital’s NFTs collection to be liquidated

As part of 3AC’s bankruptcy proceedings, over 300 NFTs from Starry Night Capital were moved this week. Teneo, the liquidation firm in charge of the Three Arrows…

US lawmakers request Justice Dept share CBDC assessment

The House members claimed the “appropriate place for the discussion” on legislation concerning a digital dollar would be in the U.S. legislative branch. Republican members of the…

Over 300 NFTs From Three Arrows Capital’s NFT Fund Moved by Liquidator to New Wallet

Hundreds of non-fungible tokens (NFTs) collected by Starry Night Capital have been transferred to a new wallet. The NFT fund of the insolvent crypto hedge fund Three…

Latest Market Crash Proved to be Narrative Breaker and Reality Check For Bitcoin: Report

Owing to the historic inflation, Q3 has been painful for Bitcoin. The largest cryptocurrency by market cap appears to have largely lost its inflation hedge and store-of-value…

Big Eyes Coin Aims To Become A Promising Crypto Coin Like Ethereum

These past several months have been particularly rough for the cryptocurrency market. Bitcoin’s price has dropped below $20,000, and the entire cryptocurrency market is now worth less…

Bitcoin Reclaims $20,000 As Key Metrics Point To Potential Bottom

After a fierce battle by bulls to maintain the price atop the $18,000 multi-year support zone in the past three months, Bitcoin managed to recapture the $20,000…

Generated by Feedzy