Breaking: Is DeFi In Trouble? Aave Blocking All Addresses Linked To Tornado Cash

Varinder Singh
August 13, 2022
Why Trust CoinGape
CoinGape has covered the cryptocurrency industry since 2017, aiming to provide informative insights to our readers. Our journal analysts bring years of experience in market analysis and blockchain technology to ensure factual accuracy and balanced reporting. By following our Editorial Policy, our writers verify every source, fact-check each story, rely on reputable sources, and attribute quotes and media correctly. We also follow a rigorous Review Methodology when evaluating exchanges and tools. From emerging blockchain projects and coin launches to industry events and technical developments, we cover all facets of the digital asset space with unwavering commitment to timely, relevant information.
Tornado Cash

The DeFi has faced a setback after the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) sanctioned crypto mixer Tornado Cash. Several Twitter users today revealed that DeFi lending giant Aave is also blocking addresses linked to Tornado Cash.

Well-known ENS addresses have reportedly received 0.1 ETH from sanctioned addresses. In response, DeFi platforms including Uniswap, Aave, and Balancer have blocked accounts that received funds from Tornado Cash.

Advertisement
Advertisement

Aave Blocks Addresses Receiving Funds from Tornado Cash

Wallet addresses of prominent users including Tron’s founder Justin Sun, Sassal0x, and Shixing Mao, co-founder of Cobo crypto custodian are blocked by Aave.

According to PeckShieldAlert, over 600 addresses have received 0.1 ETH from Tornado Cash 0.1 ETH contract, these include personalities and centralized exchanges.

People believe “decentralization in DeFi” is in trouble as DeFi platforms including Aave, Uniswap, Balancer, dYdX, Alchemy, and Infura blocked addresses. In fact, platforms like Discord and Github have also removed services related to the crypto mixer.

It is a huge decentralization risk. The government doesn’t regulate these blockchain-focused companies. Thus, sharing data or following laws without regulation fails the whole purpose of decentralization.

Moreover, one of the Tornado Cash developers was arrested in the Netherlands yesterday. The crypto community condemns arresting developers of open-source software by authorities.

Users can still access the wallet by using an alternative front end, as the dApps have blocked the front end only. However, it is not immediately clear if DeFi platforms would ban these addresses at the smart contract level.

Moreover, many companies and organizations have banned Tornado Cash after the U.S. Treasury Department’s Office of Foreign Assets Control added it to its Specially Designated National list.

Advertisement
Advertisement

Impact of the Crypto Mixer Ban on Stablecoins

The Tornado Cash event has challenged the decentralized nature of stablecoins USDC, DAI, FRAX. Stablecoins are the backbone of the DeFi industry. With Circle blacklisting all Tornado Cash wallet addresses, restricting the movement of USDC funds based on sanction orders by the U.S. OFAC.

Besides, DAI and FRAX are backed by USDC to maintain their peg to USD. People believe these are now at risks as the OFAC can forcibly take control of it by sanctioning any smart contract, DAO, protocol, or company to make it illegal.

Advertisement
coingape google news coingape google news
Investment disclaimer: The content reflects the author’s personal views and current market conditions. Please conduct your own research before investing in cryptocurrencies, as neither the author nor the publication is responsible for any financial losses.
Ad Disclosure: This site may feature sponsored content and affiliate links. All advertisements are clearly labeled, and ad partners have no influence over our editorial content.

Why Trust CoinGape

CoinGape has covered the cryptocurrency industry since 2017, aiming to provide informative insights Read more…to our readers. Our journal analysts bring years of experience in market analysis and blockchain technology to ensure factual accuracy and balanced reporting. By following our Editorial Policy, our writers verify every source, fact-check each story, rely on reputable sources, and attribute quotes and media correctly. We also follow a rigorous Review Methodology when evaluating exchanges and tools. From emerging blockchain projects and coin launches to industry events and technical developments, we cover all facets of the digital asset space with unwavering commitment to timely, relevant information.

About Author
About Author
Varinder has over 10 years of experience and is known as a seasoned leader for his involvement in the fintech sector. With over 5 years dedicated to blockchain, crypto, and Web3 developments, he has experienced two Bitcoin halving events making him key opinion leader in the space. At CoinGape Media, Varinder leads the editorial decisions, spearheading the news team to cover latest updates, markets trends and developments within the crypto industry. The company was recognized as Best Crypto Media Company 2024 for high impact and quality reporting. Being a Master of Technology degree holder, analytics thinker, technology enthusiast, Varinder has shared his knowledge of disruptive technologies in over 5000+ news, articles, and papers.
Investment disclaimer: The content reflects the author’s personal views and current market conditions. Please conduct your own research before investing in cryptocurrencies, as neither the author nor the publication is responsible for any financial losses.
Ad Disclosure: This site may feature sponsored content and affiliate links. All advertisements are clearly labeled, and ad partners have no influence over our editorial content.