Here’s how investors can withdraw locked crypto in Tornado Cash

The U.S. Department of Treasury recently sanctioned Tornado Cash in one-of-a-kind action as it blacklisted open source software rather than an organization or individual. Crypto enthusiasts have come out against the decision, claiming it was an overreach. The introduction of this legislation could have far-reaching implications for the tech sector. Afterwards, the U.S. Department of Treasury issued rules (FAQ) on how to withdraw funds from the outlawed crypto entity.

Tornado Cash linked to North Korea hackers

On August 8, the Treasury blacklisted and added Tornado Cash to the Specially Designated Nationals list due to a national-security problem. Tornado Cash users cannot access the platform’s assets or any Ethereum wallets linked with it. The move was based on accusations that North Korean hackers (Lazarus Group) used it to launder money. Reports show that the group sent millions of dollars worth of crypt0 through Tornado Cash, claiming that over 20% of the mixer’s volume was connected to criminal activity.

Arguments arising from the sanction

Crypto experts argue that Tornado, unlike other sanctioned institutions, does not have a management structure, making it ineligible for a blacklist. Additionally, since it's a program run on Ethereum, it’s protected by the First Amendment. After sanctions were announced, actions such as arresting one of Tornado’s developers by Dutch police have been viewed even more dubiously. Recently, six plaintiffs–including Coinbase–have filed a lawsuit challenging the sanctions. Also, Tornado’s DAO voted to take the Treasury to court.

U.S. Treasury FAQ guidelines on how to withdraw crypto from Tornado Cash

OFAC states that only the assets involved in transactions before August 8 and not used in “sanctionable behavior” can be withdrawn. According to the guidelines, users will need to request a specific license from OFAC and provide wallet addresses for both the remitter and beneficiary as well as transaction hashes. Lastly, transactions must include the date and time stamp and the number of digital assets involved in the complaint.

According to OFAC, no more action can be taken on the platform for U.S. citizens from this point onwards. If any U.S. members were to start or get involved in a transaction with Tornado Cash, including its wallet addresses, it would go against U.S. sanctions and regulations – unless authorized by OFAC, of course.

Other matters addressed in the OFAC FAQ

The FAQs addressed the fact that after the sanctions were announced, individuals attempted to troll celebrities by sending them tiny quantities of ether through Tornado Cash. The FAQs clarify that while U.S. citizens are not permitted to engage in any act with Tornado Cash if a small amount of money is given to them without their permission, they do not have to report the transaction right away.

A study by Coin Center concluded that the government agency exceeded its legal authority and has not adequately addressed the foreseeable consequences of [its] actions on innocent people. The organization said they planned to start discussing the issue with regulators and might even take the case to court.

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