The latest data from Chainalysis has revealed a significant decline in inflows to the decentralized financial platform, Tornado Cash, following the imposition of sanctions. The statistics indicate a staggering 93% decrease in monthly inflows compared to the averages before the sanctions were enforced, underlining the impact of regulatory measures on privacy-focused projects like Tornado Cash.
A Nosedive for Tornado Cash Post-Sanctions
Tornado Cash, a well-known coin mixer, experienced a significant setback in August 2022 when the Lazarus Group was designated as a sanctioned entity for laundering over $455 million in stolen crypto assets. Despite being delisted and redesignated by the Office of Foreign Assets Control (OFAC) in November, Tornado Cash’s decentralized structure made it resistant to physical shutdowns.
According to Chainalysis, this decline in monthly inflows was evident when compared to pre-sanctions trends. Although Tornado Cash’s inflows have increased by 28% since the OFAC sanctions were imposed, they have decreased by a drastic 89.2% compared to the pre-sanctions era.
The Rise of Sanctioned Entities and Illicit Crypto Activity
With the increasing number of sanctioned entities, such as those linked to North Korean hacking groups and US-designated terrorist organizations like Lebanon’s Hezbollah, the use of cryptocurrencies as a funding mechanism has become more prevalent.
In 2023, Chainalysis identified crypto addresses associated with OFAC-designated entities. These entities accounted for around 61.5% of overall illicit transaction volume, which totaled $14.9 billion last year. This indicates that entities subject to sanctions often seek alternative mechanisms to store, send, and receive funds when cut off from international traditional financial systems.
Sanctions in 2023: Targeting Entities and Individuals
In 2023, the Office of Foreign Assets Control (OFAC) imposed a total of 18 sanctions on organizations associated with crypto addresses. Among these were Trickbot ransomware gang members, who accounted for 61.5% of the illegal transaction volume.
Nine of these new sanctions targeted individuals and businesses in China and Latin America for their suspected involvement in fentanyl production and trafficking. Five of the sanctions targeted businesses that were found to have breached North Korean sanctions.
A Shift in OFAC’s Crypto-Related Priorities
Unlike the previous year, when key services such as Garantex, Hydra, Tornado Cash, and Blender.io were targeted, OFAC primarily focused on targeting groups and people in 2023, with the exception of Genesis Market and Sinbad.io.
The 2024 Crypto Crime Report: Sanctioned Entities and Illicit Activity
As entities continue to find ways to bypass sanctions, the use of cryptocurrencies by these groups remains a significant concern. In 2023, sanctioned entities like those linked to North Korean hacking groups and US-designated terrorist organizations accounted for a higher proportion of illicit transactions.
Crypto mixers, such as Tornado Cash and Garantex, have become the primary recipients of criminal funds. These software programs conceal the history and origin of digital assets transmitted through them.
Despite the challenges, sanctions have proven effective in impeding the flow of cryptocurrency funds to their intended targets. For instance, Tornado Cash’s monthly inflows decreased by up to 93% shortly after being added to the U.S. sanctions list. However, the firm noted that these inflows gradually recovered in the following months.
Iran was a significant recipient of illegal funds among sanctioned nations, accounting for 73.3% of inflows from international mainstream exchanges. This suggests that these services might be used to circumvent sanctions.
The rise of decentralized financial platforms and the use of cryptocurrencies by sanctioned entities underline the need for continuous monitoring and regulation in the crypto ecosystem.
—Written by [Your Name], a content writer specialized in blockchain technology and cryptocurrency.
