Circle Freezes Blacklisted Tornado Cash Smart Contract Addresses

Stablecoin issuers can blacklist interactions with the Tornado Cash DApp at the Ethereum smart contract level.

Crypto data aggregator Dune Analytics said on Monday, Circle, the issuer of the USD Coin (USDC) stablecoin, froze more than 75,000 USDC in funds tied to the 44 US Bureau-sanctioned Tornado Cash addresses control of foreign assets. List of Specially Designated Nationals and Blocked Persons (SDN). Tornado Cash is a decentralized application, or DApp, used to hide the trail of previous cryptocurrency transactions on the Ethereum blockchain.

All US persons and entities are prohibited from interacting with the virtual currency mixer USDC and Ethereum smart contract addresses on the SDN list. Penalties for willful non-compliance can range from fines of $50,000 to $10,000,000 and 10 to 30 years in prison. Assets worth an estimated $437 million, consisting of stablecoins, Ethereum, and Wrapped Bitcoin (WBTC), are currently held in Tornado Cash smart contract addresses. Accordingly, issuers are expected to take steps to prevent the transaction or redemption of such assets.

The two entities behind USDC and Tether can freeze their stablecoin transfers to and from Tornado Cash at the Ethereum smart contract level. Meanwhile, Palo Alto, Calif.-based BitGo would also, in theory, have to restrict access to Tornado Cash to comply with such sanctions. One possible method is to suspend redemption of WBTC tied to Tornado Cash.

As pseudonymous DeFi educator BowTiedIguana said, the new Tornado Cash sanctions apply to all U.S. individuals and entities. Simple interactions such as Gitcoin donations, working for the project, running or...