TORN has lost 95% of its value since its all-time high in February last year.
By contrast, larger cryptocurrencies Bitcoin and Ethereum posted smaller declines on Tuesday, falling roughly 1%.
TORN is the native token of Tornado Cash, a popular crypto service, which allows customers to mask their transactions by mixing funds from different sources before transmitting them to the ultimate beneficiary. This feature has made it a preferred tool for hackers and criminals to launder stolen or illicitly acquired funds.
Earlier on Monday, the US imposed sanctions on virtual currency mixer Tornado Cash, accusing it of helping hackers, including from North Korea, to launder proceeds from their cyber crimes.
A senior Treasury Department official said Tornado Cash, one of the largest mixers identified as problematic by the Treasury, has reportedly laundered more than $7 billion worth of virtual currency since it was created in 2019.
Monday's move freezes any US assets of the mixer and generally bars Americans from dealing with it.
The Lazarus Group, a well-known North Korean government-backed hacking group that has conducted numerous data breaches, both politically and sometimes financially motivated, has laundered at least $455 million through Tornado Cash, the Treasury said.
The Lazarus Group is already under U.S. sanctions. The group has conducted numerous significant data breaches historically, including an intrusion into Sony Pictures in late 2014.
US and South Korean officials say North Korea controls thousands of hackers that steal funds, including cryptocurrencies, to finance its weapons programs.
Pyongyang has denied the accusations.
Tornado Cash and the North Korean mission to the United Nations in New York did not immediately respond to requests for comment.
Tornado Cash was also used to launder about $100 million from a hack into virtual currency firm Harmony in June and as recently as last week in the theft of Nomad, a virtual currency technology company, the Treasury said.
Despite prior requests for Tornado Cash to make changes, the criminal activity continued, the Treasury official said, leading to the decision to designate the mixer.
In May, the U.S. Treasury also targeted virtual currency mixer Blender, imposing sanctions for the first time on a mixer - a software tool that pools and scrambles cryptocurrencies from thousands of addresses.
Hacks have long plagued crypto platforms. And experts say Tornado Cash has played a role in these crimes.
"Tornado is a popular and important tool for cybercriminals and state-backed hacking groups," said Dr Tom Robinson, cofounder of Elliptic, a cryptocurrency analytics firm. "In total, Elliptic's analysis shows that at least $1.3 billion in proceeds of crime such as ransomware, hacks and fraud have been laundered through Tornado Cash."
