On September 13, 2022, the US Department of the Treasury’s Office for Foreign Assets Control (OFAC) published four Cybersecurity-related Frequently Asked Questions (FAQs 1076 – 1079). FAQ 1079 advises that Tornado Cash users who are US persons or within US jurisdiction who may not have completed a mixing transaction before Tornado Cash’s August 8, 2022 designation, may complete such transactions if they first request and obtain a specific license to do so from OFAC. OFAC indicates that it has a favorable licensing policy for such requests as long as the transaction did not involve other sanctionable activity.
Just days before FAQ 1079 was published, six Tornado Cash users who had pending transactions or virtual currency in Tornado Cash wallets at the time of the designation, filed a suit against the Department of the Treasury and OFAC seeking to overturn the sanction.
FAQ 1078 addresses the reporting obligations regarding “dusting” transactions or transactions that involve the receipt of unsolicited and nominal amounts of virtual currency or other virtual assets from Tornado Cash. While OFAC regulations do apply to these transactions, if the “dusting” transactions have no other sanctions nexus besides the connection to Tornado Cash, OFAC will not prioritize enforcement against US persons who provide delayed initial blocking reports and subsequent annual reports of blocked property. Guidance related to the filing of these reports can be found at FFAQs 49, 50, and 646, and 31 CFR § 501.603.
OFAC issued FAQ 1077 to reiterate that US persons are prohibited from engaging in transactions involving Tornado Cash or any of the identified virtual currency wallet addresses associated with Tornado Cash without first obtaining a specific license from OFAC, while FAQ 1078 provides an overview of the prohibitions resulting from Tornado Cash’s designation. According to FAQ 1078, Tornado Cash’s designation included as identifiers certain virtual currency wallet addresses and the URL address for the Tornado Cash website, and engaging in any transaction with Tornado Cash or its blocked property or property interests is prohibited for US persons. OFAC also reports that the Tornado Cash website has been deleted from the Internet but still remains available in certain Internet archives. However, OFAC indicates that US persons are not prohibited from interacting with open-source code in a way that does not involve a prohibited transaction with Tornado Cash. For example, US persons are not prohibited from copying Tornado Cash’s open-source code, making it available online for others to view, and, in certain circumstances, including it in written publications or even teaching about it. US persons would also not be prohibited from visiting the internet archives for the Tornado Cash historical website or visiting the Tornado Cash website if it becomes active on the internet once again.