OKX to close accounts interacting with Tornado Cash
OKX chief operating officer Star Xu warned account holders against Tornado Cash (TORN), saying any interaction with the platform would result in a ban.
In a statement posted on X, the CEO announced that any users who have been previously sanctioned will not be allowed to open new accounts on OKX. Moreover, per the statement, the crypto exchange will close down accounts of users making deposits from sanctioned entities such as Tornado Cash (TORN) and Garantex.
OKX appears to be enforcing these measures to comply with global laws, limiting crypto mixers’ use. Entities such as Tornado Cash have been in the cross hairs of regulators all around the globe, who claim that crypto mixers are commonly used to transact illicit funds and are the favored tools of international criminal networks, in addition to rogue states such as North Korea who have also been found to have used such services.
Tornado Cash was founded in 2019 by a group of Russian nationals based in Europe: Roman Semenov, Alexey Pertsev, and Roman Storm. The entity specializes in a type of anonymizing cryptography that uses software to obfuscate the origins of cryptocurrencies deposited through the service, effectively redistributing deposited funds into many small transactions that are difficult to track. Labeled as a privacy coin, Tornado Cash has had it shares of run-ins with regulators around the globe, accused of everything for laundering stolen funds for international criminal organizations, to indirectly funding North Korea’s nuclear program.
In addition, in June Blockchain security firm Slowmist uncovered an SIM swapping incident on OKC that resulted in at least two users having their funds trained from the exchange, due in part to a flaw in its two-factor authentication (2FA) system, which led to unauthorized access to their accounts.
The security incidents have shaken confidence in OKX, and it appears that their latest efforts to ban Tornado Cash related accounts is an attempt regain double down on compliance with global regulatory laws, both enacted and proposed.
Earlier this year, the United States House of Representatives proposed a bill, dubbed the Blockchain Integrity Act, to ban crypto mixers for two years. The bill, introduced by Democratic Party member U.S. representative Sean Casten, aims to prohibit virtual asset service providers and other registered money service businesses from accepting funds routed through a mixer or allowing withdrawals directly to a mixer’s address. Any breach of this rule will incur a civil penalty of up to $100,000.
The House’s sentiment about Tornado Cash was also echoed by the European Union, which voted in April to force the monitoring of non-custodial wallets while banning crypto mixers and privacy coins.
With the regulatory headwinds pointing towards a resolution—if not outright ban—on crypto mixers, entities such as Tornado Cash and exchanges that allow their tokens to be traded and listed may soon be listed within the echelons of black market crypto.
