U.S. Lawmakers Urge Treasury to Investigate Crypto Mixing Services

U.S. lawmakers are calling on the Treasury Department to investigate illicit finance through crypto mixing services, particularly Tornado Cash.

Democrat Rep. Sean Casten of Illinois led the letter sent to the Treasury last week, joined by Reps. Stephen Lynch, Brad Sherman, Bill Foster, David Scott, Emanuel Cleaver, and Joyce Beatty. Casten, Sherman, Foster, and Cleaver have been particularly critical of cryptocurrencies and their use by malicious entities.

The Treasury's Office of Foreign Assets Control (OFAC) designated Tornado Cash as a sanctioned entity in August 2022, which prohibited U.S. individuals and firms from financial dealings with it. Critics from the crypto sector noted that Tornado Cash is software, not a person, and argued that the Treasury lacked the authority to sanction the platform.

The lawmakers contended that crypto mixers pose significant national security threats.

In their letter, they noted, "Despite sanctions, Tornado Cash has remained online and continues to function as decentralized smart contracts."

They have asked the Treasury to answer questions by December 2, which include inquiries about Tornado Cash's activity since August 2022, whether sanctions have led to an uptick in suspicious activity reports, and if further sanctions are being considered.

The lawmakers also inquired whether the Treasury would contemplate imposing secondary sanctions on non-U.S. persons and cryptocurrency exchanges located outside the U.S. that interact with funds from Tornado Cash.

Earlier this year, Reps. Casten, Foster, Cleaver, and Sherman proposed a bill to temporarily prevent financial institutions from engaging in transactions with funds processed through crypto mixers for two years while Treasury, the Securities and Exchange Commission, and other agencies conduct a study on illicit uses.

The Treasury Department has not commented on the request.