US Treasury Clarifies How to Comply with Regulations on Sanctioned Cryptocurrency Mixing Service Tornado Cash – Bitcoin News

The US Department of the Treasury has answered some regulatory compliance questions related to Tornado Cash, a recently sanctioned cryptocurrency mixer. Answers include how to withdraw cryptocurrency or complete transactions started with Tornado Cash prior to its sanction and how to deal with “dusted” transactions.

Treasury Department Posts Frequently Asked Questions About Tornado Cash

The US Department of the Treasury answered some frequently asked questions on Tuesday about the authorized cryptocurrency mixing service Tornado Cash.

On August 8, Treasury’s Office of Foreign Assets Control (OFAC) sanctioned the Ethereum-based mixer and prohibited Americans from “engaging in any transaction with Tornado Cash or its blocked property or interests in property.”

One of the questions asks how to complete Tornado Cash-related transactions that were initiated before the sanction. In order to complete transactions or withdraw crypto without violating US sanctions regulations, the Treasury Department explained:

US persons or persons transacting within US jurisdiction may apply for a specific license from OFAC to conduct transactions involving the virtual currency in question.

“U.S. persons should be prepared to provide, at a minimum, all relevant information regarding these Tornado Cash transactions, including wallet addresses for the sender and recipient, transaction hashes, date and time of Transaction(s), as well as the amount(s) of virtual currency,” the Treasury added.

Another question is related to the information obligations of the “dusting” transactions. Treasury noted that OFAC is aware that “certain U.S. persons may have received nominal and unsolicited amounts of virtual currency or other virtual assets from Tornado Cash, a practice commonly known as ‘dust.'”

While warning that “technically, OFAC regulations would apply to these transactions,” Treasury explained that if these dusting transactions have no sanctions nexus other than Tornado Cash:

OFAC will not prioritize enforcement over delay in receipt of initial block reports and subsequent annual blocked property reports from such US persons.

Treasury emphasized that “US persons are prohibited from conducting transactions involving Tornado Cash, including through virtual currency wallet addresses that OFAC has identified.” However, the authority clarified:

It is not prohibited to interact with the open source code itself, in a manner that does not involve a prohibited transaction with Tornado Cash.

Lawyer Jake Chervinsky shared his thoughts about the OFAC clarification in a series of tweets. He noted that the FAQs “do not fully address the collateral damage caused by the designation.” Commenting that OFAC requires “each person to file their own individual license application,” Chervinsky said, “That shouldn’t be necessary: ​​American people shouldn’t have to ‘apply’ for their own money.”

Regarding dusting, he said that since victims must file initial crash reports and subsequent annual reports, “enforcement is still on the table if those reports are delayed.” The lawyer stressed:

Failing to prioritize prosecution is not enough: OFAC should not consider prosecuting victims at all.

Following the sanction of Tornado Cash, Coin Center, a nonprofit organization focused on policy issues facing cryptocurrencies, said that OFAC has exceeded its legal authority.

What do you think of the Treasury’s clarification regarding the Tornado Cash mixing service? Let us know in the comments section.

kevin helms

Kevin, an Austrian economics student, found Bitcoin in 2011 and has been an evangelist ever since. His interests lie in the security of Bitcoin, open source systems, network effects, and the intersection between economics and cryptography.

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