Recent government sanctions against blockchain programs have highlighted the power held by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) and the vulnerability of the blockchain ecosystem to an abuse of that power. OFAC is now facing a lawsuit funded by the largest blockchain exchange in the United States relating to sanctions on a blockchain protocol known as “Tornado Cash.” The future of blockchain technology could depend on the outcome of that lawsuit and on how OFAC’s decides to exercise its power to impose sanctions on blockchain programs and assets.

OFAC Sanctions Tornado Cash

On Aug. 8, 2022, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced that it had sanctioned a virtual currency mixer known as Tornado Cash. OFAC also sanctioned the website tornado.cash, along with dozens of addresses on the Ethereum blockchain that it described as “associated virtual currency addresses.”