Cooperation with the US Treasury sanctions on Tornado Cash was strongest at the user level and weaker further along the settlement chain.
The Federal Reserve Bank of New York has released a report on the effect of sanctions on Tornado Cash, the crypto mixer that was blocklisted by the United States Treasury Department in 2022. Sanctions work, by and large, even in decentralized finance, the report concluded.
The report’s findings also apply to Ethereum. The Ethereum network’s resistance to censorship and cooperation shows “fragility,” the report says.
The Treasury’s Office of Foreign Assets Control (OFAC) sanctioned addresses associated with the so-called crypto mixer Tornado Cash on Aug. 8, 2022. The move was a response to large-scale money laundering operations it had enabled by obscuring the movement of crypto funds onchain. It was the first time a computer protocol had been sanctioned.
