FTX Flags More Privacy Tools After Tornado Cash Sanctions

The exchange reportedly described using privacy tool Aztec as a high-risk activity

article-image

Blockworks Exclusive Art by Axel Rangel

share

key takeaways

  • FTX warned users against interacting with Aztec addresses, screenshots on Twitter showed
  • The move comes after mixing service Tornado Cash was sanctioned over money laundering allegations

FTX appears to be blocking users from sending funds that interacted with privacy-focused Aztec protocol.

The crypto exchange warned users against using “high-risk” services Aztec Connect, Aztec Network and zk.money, according to screenshots and tweets posted by multiple FTX users. 

One user said access to his FTX account was frozen for transactions made to and from the service. Another suggested interacting with customer service privately to avoid related issues. The crypto exchange also appeared to ask some users the origin of their funds and the purpose of the transaction via email, one screenshot showed.

Aztec’s zk.money protocol, launched in March 2021, can be used to send and receive funds privately for direct Ethereum transactions. It uses a shield model similar to a virtual private network, allowing users to privately connect to Ethereum’s decentralized finance (DeFi) ecosystem, including Uniswap and Aave.

The move, first spotted by Chinese journalist Colin Wu, highlights FTX’s concerns about its exposure to risky addresses.

The crypto community reacted negatively to FTX’s restriction, with some pointing out that a desire for privacy shouldn’t be criminalized. Others noted a chunk of wallets could get blocked for simply having indirectly interacted with private layer-2s such as Aztec. 

Loading Tweet..

Neither FTX nor Aztec immediately confirmed the restricted access when contacted by Blockworks.

FTX’s compliance concerns come after the US Treasury sanctioned mixing service Tornado Cash, along with other 45 related Ethereum wallet addresses, for alleged virtual currency laundering for criminals.

Mixers have come under increasing scrutiny after an uptick in illicit money moving through such services in 2022. They are designed to conceal the identity of holders and the origins of currency by pooling together multiple transactions.

Other platforms following the same approach as Tornado Cash are likely to receive the same scrutiny, leading to additional measures for increased transparency, according to Tammy Da Costa, analyst at DailyFX.

“For virtual currency, the sanctions against these services have highlighted the shift in regulations that aim to monitor transactions made through a blockchain,” Da Costa told Blockworks in an email.

Zac Williamson, CEO of Aztec, criticized sanctions against Tornado Cash on Twitter, saying “there is a short window where heavy-handed regulation could strangle the innovation required to get us there.”


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the Forward Guidance newsletter.

Get alpha directly in your inbox with the 0xResearch newsletter — market highlights, charts, degen trade ideas, governance updates, and more.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Javits Center North | 445 11th Ave

Tues - Thurs, March 18 - 20, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

Flashnote Template (6).png

Research

Trading of the President's TRUMP memecoin sent the market capitalization to over $15B, resulting in all-time highs for Solana’s Real Economic Value, DEX volumes, and stablecoin supply. This event further validates Solana as the venue for high-throughput onchain activity, with Solana DEXs and DeFi applications as primary beneficiaries, while also signaling to further experimentation, utilization, and adoption of memecoins as legitimate financial instruments for speculation, crowdfunding, or capital formation. President Trump’s continued willingness to experiment in crypto reaffirms a highly-favorable political and regulatory climate for the industry.

article-image

CME Group’s inadvertent glimpse into possible product plans comes as crypto ETF filings have accelerated in recent weeks

article-image

Senator Cynthia Lummis, who is pushing for a national strategic bitcoin reserve, will lead the new subcommittee

article-image

FX volatility is believed to be the key exhaust valve of Trump’s tariff and trade policy this year

article-image

An EF-backed group focused on institutional adoption wants to be a resource for TradFi

article-image

Back in 2021, there were really only two memecoins and both hit enormous peaks along with BTC

article-image

Polygon Labs CEO Marc Boiron thinks that yield-bearing stablecoins could be the next big narrative