• Chainalysis revealed that the sanctions imposed on Tornado Cash weren’t able to completely cut off its usage.
• Total inflows to Tornado Cash declined by 68% in the 30 days after the sanctions were implemented.
• The Chainalysis team said that sanctions against decentralized services act more as a tool to disincentivize the service’s use rather than cutting off usage completely.
The Office of Foreign Assets Control (OFAC) recently announced sanctions against Tornado Cash on August 8, 2022, based on allegations of its part in the laundering of crime proceeds. In response to the sanctions, Chainalysis conducted a study on the effects of the sanctions on Tornado Cash. The results of the study revealed that the sanctions had impacted the usage of the cryptocurrency mixer, but had not completely shut it down due to its decentralised nature.
Total inflows to Tornado Cash declined by 68% in the 30 days after the sanctions were implemented. The Chainalysis team said that the sanctions had acted as a disincentive to the service’s use rather than completely cutting off access to it. Despite the sanctions, the smart contract code of Tornado Cash can still be used at any time.
The sanctions also saw the front-end website of Tornado Cash taken down. However, the decentralized nature of the platform meant that it was still possible for users to access the service, albeit at a significantly lower rate than before the sanctions.
Chainalysis also pointed out that the sanctions had a limited impact on the overall amount of funds floating around in the Ethereum network. This suggests that the sanctions had a limited effect on the total amount of money being laundered.
The study conducted by Chainalysis revealed that the sanctions imposed on Tornado Cash had a significant impact on its usage, but had not completely shut it down. This shows that it is difficult to completely shut down a decentralized service, as the smart contract code can be used at any time. The sanctions acted as a disincentive to the service’s use, but it is still possible to access the service, albeit at a significantly lower rate than before the sanctions.