OKX, one of the leading crypto exchange platforms, has announced strict measures against users interacting with Tornado Cash, immediately closing any accounts associated with this decentralized mixing service.
The CEO of OKX, Star Xu, emphasized that these measures are aimed at complying with international sanctions, particularly US sanctions, to prevent the platform from being used to launder stolen funds.
OKX’s new rules have raised concerns among users, with some advising to withdraw their funds, while OKX has reiterated its commitment to compliance and the security of users’ ‘clean’ funds.
Context and Justifications
Tornado Cash, a decentralized mixing service, is used by some to obscure the origin and destination of crypto transactions. While this service is popular among privacy-conscious users, it is also exploited by malicious actors to launder stolen funds. This illicit use has caught the attention of regulators, prompting platforms like OKX to strengthen their compliance controls.
Repressive Measures
Star Xu highlighted that users depositing funds from sanctioned entities such as Garantex or Tornado Cash, or attempting to withdraw funds to these entities, will trigger OKX’s risk control mechanisms. ‘We are required to comply with applicable sanctions policies, including US sanctions,’ he asserted. This strict approach aims to ensure that OKX is not used to facilitate illicit financial activities.
User Reactions and OKX’s Responses
OKX’s announcement comes after a user known as Satoshi Friends publicly advised their community, especially users from Commonwealth of Independent States (CIS) countries, to immediately withdraw their funds from the platform. This user mentioned the exchange’s strict policies and shared personal experiences where accounts were blocked and funds frozen, resulting in asset losses. In response to these concerns, Xu acknowledged that the user’s account had carried out several significant transactions related to sanctioned exchanges or DeFi protocols. However, he added that the user had been allowed to withdraw their ‘clean’ funds before the account closure, without mentioning a resolution for other types of funds.
Strict Compliance Policy
OKX also refused to transfer the user’s data from an old account to a new one, citing potential violation of their compliance policy and a risk of sanctions circumvention. Xu reiterated the importance of compliance for OKX, stating that the platform does not provide services to individuals or entities listed on the Specially Designated Nationals (SDN) list and cannot offer its services to those under sanctions.
User Confidence and Preventive Measures
Despite the severity of the new measures, Xu reassured the majority of users that they would likely not be affected by these actions as they are distant from sanction programs and do not engage in transactions related to sanctioned individuals. However, these developments highlight the risks associated with using crypto services in an increasingly stringent regulatory environment.
If even Vitalik would be concerned, what would happen to a user receiving funds deposited from Tornado Cash by another malicious user?
