Tornado Cash, a popular service for anonymous cryptocurrency transactions, was sanctioned by the U.S. Department of the Treasury in 2022. This move was part of a broader campaign against services that could be used for money laundering or financing illegal activities. The sanctions affected not only the Tornado Cash protocol itself but also its developers and addresses associated with its use. As a result, the platform’s blocking sparked significant discussions within the crypto community regarding privacy, freedom to use technology, and human rights.
The reasons for the sanctions were that Tornado Cash, as a decentralized protocol, allowed users to anonymize transactions on the Ethereum blockchain. This made it difficult to trace the origin of funds, making the service attractive for various illicit activities, including money laundering and terrorism financing. The protocol had been used by groups such as the Lazarus Group (a North Korean hacker group), which illegally moved billions of dollars through the platform.
However, Tornado Cash is an entirely decentralized protocol, operating on smart contracts, and its developers argued that their goal was to provide tools for enhancing privacy and protecting users’ personal data, not to facilitate illegal activities. Unlike centralized platforms, which can be subject to regulation and sanctions, Tornado Cash has no single owner or manager. This posed a difficult challenge for governments—how to regulate or ban protocols that serve legitimate users but can also be misused.
After the sanctions, Tornado Cash faced wide-ranging consequences, including bans on many cryptocurrency exchanges and services. The developers and supporters of the protocol began fighting for its rehabilitation, emphasizing the importance of anonymity in cryptocurrency transactions and the need to protect users’ freedom.
Recently, however, news emerged that some of the sanctions against Tornado Cash had been partially eased. This came about due to efforts by the crypto community and human rights advocates, who focused on separating the protocol from its creators. The main achievement was that the Tornado Cash protocol is now functioning in a more decentralized form, which allows some of the sanction pressures to be lifted.
The decision to ease sanctions highlights the importance of privacy and decentralization in the crypto industry. Developers and cryptocurrency users argue that anonymity is an integral part of freedom and security on the internet. This case has become an important precedent for further discussions and the development of policies aimed at balancing data protection with preventing illegal activities.
Thus, while the sanctions against Tornado Cash have not been fully lifted, the partial easing shows how important it is at the government level to consider technologies and their potential for ensuring privacy in the digital age.
