The Aftermath of Tornado Cash: How Sanctions are Shaping New Mixing Services

The Impact of Tornado Cash Sanctions

The recent sanctions on cryptocurrency mixer Tornado Cash, imposed by the United States Treasury, have left many scratching their heads. What comes next? According to Chainalysis’ chief scientist Jacob Illum, we’re in a waiting game. While some usage of Tornado Cash persists, individuals are measuring their next steps amidst looming uncertainty.

A Cautious Approach

Illum emphasized that many people in the crypto space are increasingly cautious. “What does this mean for me?” is the new mantra, leading, at least temporarily, to a dip in deposits into alternative mixing services. The long-term effects remain to be seen as enthusiasts and users adjust their strategies.

The Rise of Junior Mixers

But where others see doom, there are those who smell opportunity. Illum pointed out that a wave of what he calls “junior mixers” have emerged to fill the gap left by Tornado Cash, aiming to cater to those still looking for similar services. Will these less established mixers win over users or will they become the new target for regulators?

Stolen Funds Through Tornado Cash

To put things in context, a report from SlowMist revealed that a staggering 74.6% of stolen funds on the Ethereum network were funneled through Tornado Cash in just the first half of 2022, totaling around $380 million. If that doesn’t send a shiver down your spine, nothing will.

Mixers and Liquidity Challenges

As Chainalysis tracks the market, one notable trend has emerged—a spike in total daily value received by crypto mixers reaching $51.8 million, according to their data. But Chainalysis country manager Todd Lenfield pointed out a key vulnerability: “If the liquidity isn’t there, you effectively dry up a lot of [a mixers] capability.”

Law Enforcement’s Learning Curve

As the landscape shifts, so too must law enforcement. Illum highlighted a crucial gap—blockchain training for law enforcement personnel is still sorely lacking. The Australian Federal Police are making strides with new cryptocurrency units to monitor transactions, but even the most adept authorities face a considerable learning curve.

Recovering Stolen Assets

In a recent success story, Chainalysis’ Crypto Incident Response team assisted in recovering $30 million in crypto stolen during the Ronin Bridge hack. The assets, reportedly laundered through Tornado Cash by a North Korean group, highlight the challenges authorities face but also showcase their capability to keep up.

Final Thoughts

So, what does the future hold for crypto mixers in the wake of Tornado Cash? Only time will tell, but in a space where change is the only constant, keeping an eye on what bubbles up from the aftermath could be as entertaining as it is critical.