Just days after the United States Office of Foreign Assets Control (OFAC) barred American citizens from using Tornado Cash for transactions, dYdX has revealed that they have blocked any accounts that previously engaged with the digital asset mixer. To comply with OFAC’s sanction, dYdX observed an increase in accounts flagged by one of its compliance vendors that were blocked subsequently after a certain portion of these funds were cited to have interacted with Tornado Cash in some way.
On its official blog, dYdX maintained that the platform cannot seize customer funds. They reiterated that the ultimate custody of funds will remain in the hands of customers who are free to withdraw at any point in time. However, it does have the power to deploy the accounts on its hosted matching engine in “close-only” mode.
dYdX also clarified that some of the accounts that may have been blocked might have never directly interacted with Tornado Cash. dYdX has tweaked it’s compliance policies to unblock certain accounts while stating that they will work towards limiting the account flagging while working on this issue on its platform.
Emotions are running high as several crypto companies are taking drastic measures to comply with OFAC’s recent sanctions. Ethereum infrastructure provider Alchemy obstructs users of Tornado Cash from accessing its nodes while Infura also followed suit by blocking remote procedure call (RPC) requests to it. GitHub has caused controversy after deleting accounts of Tornado’s contributors immediately the Treasury Department added the privacy tool to its sanctions list.
The main argument put forward by the US Treasury is that several individuals and groups have used Tornado Cash to launder over $7 billion in crypto since 2019. This includes the $455 million stolen by the notorious state-backed syndicate, Lazarus Group.The blacklisting of the privacy tool prompted widespread outcry from several market leaders. Director of research at Coin Center, Peter Van Valkenburgh, called the ban unconstitutional while Ethereum co-founder, Vitalik Buterin, revealed that he used the cryptocurrency mixer to donate funds to Ukraine.
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