The US government has imposed sanctions on Tornado Cash, a decentralized cryptocurrency mixer that runs on Ethereum. The Treasury Department accused the protocol of facilitating money laundering and sanctions evasion for North Korean hackers who stole millions of dollars worth of crypto assets.

Tornado Cash is a service that allows users to send and receive cryptocurrencies anonymously, by mixing their transactions with others and breaking the link between the sender and the receiver. The protocol claims to offer a high level of privacy and security, using zero-knowledge proofs and smart contracts.

However, US authorities allege that Tornado Cash was used by the Lazarus Group, a notorious hacking group linked to the North Korean regime, to launder hundreds of millions of dollars in stolen tokens from various crypto exchanges and platforms.

According to the Treasury Department, Tornado Cash has violated US sanctions and anti-money laundering laws by enabling illicit actors to conceal their identity and origin of funds. The protocol has also failed to register as a money services business or implement any know-your-customer or due diligence measures.

As a result, the US government has designated Tornado Cash as a specially designated national (SDN), meaning that US citizens, residents, and companies are prohibited from using or transacting with the protocol. The protocol’s website and GitHub accounts have also been taken down, and one of its developers has been arrested in the Netherlands.

The sanctions on Tornado Cash are part of a broader crackdown on crypto-related crimes by the US government, which has also targeted other mixers, ransomware operators and rogue states. The move has sparked a debate in the crypto community about the trade-off between privacy and regulation in the decentralized space.