Tornado Cash, one of the most controversial decentralized privacy protocols in the blockchain field, has sparked extensive discussions about privacy, regulation and technology since its inception. It provides users with anonymous transaction services through ZK Proof technology, but it has also become a key focus of regulators because of its use in money laundering activities.

Recently, its related token TORN soared more than 70% on Friday after news broke that the U.S. Treasury Department removed the crypto mixer Tornado Cash from its Office of Foreign Assets Control (OFAC) sanctions list. This article will deeply interpret the fate and future of this agreement from multiple angles such as Tornado Cash's technical principles, regulatory sanctions, legal litigation, industry position and latest progress.

1. Concept and technical principles of Tornado Cash

Tornado Cash is a decentralized privacy protocol designed to hide user identity information through mixed transactions. Its core mechanism is based on ZK Proof, allowing users to prove the legitimacy of their transaction behavior without revealing their specific identities.

1.1 Implementation of privacy protection

After the user deposits tokens into the Tornado Cash's smart contract, he will obtain a zero-knowledge proof. This proof allows users to use a brand new address when withdrawing money, thereby cutting off the correlation between deposit and withdrawal addresses. To further enhance privacy, all deposits and withdrawals in Tornado Cash’s pool remain consistent. For example, if 100 users deposit the same amount of tokens and then 100 users withdraw the same amount, although the transaction records are disclosed, the specific deposit and withdrawal relationship cannot be tracked.

1.2 Decentralization and immutability

Tornado Cash's smart contract is completely open source and is deployed on the Ethereum blockchain. This means that anyone can view and use these contracts, but cannot modify or control them. This decentralized feature makes Tornado Cash a neutral tool rather than a platform controlled by an entity.

2. OFAC's sanctions: Conflict between privacy and security

In August 2022, the Office of Foreign Assets Control (OFAC) under the U.S. Treasury Department included Tornado Cash as a "special"List of designated and blocked persons” (SDN), citing its widespread use in money laundering activities.

2.1 Sanctions Background

OFAC notes that since 2019, the hacker group Lazarus has used Tornado Cash to carry out money laundering activities, involving hundreds of millions of dollars. For example:

● In March 2022, more than $455 million of funds were whitewashed through Tornado Cash.

● In June 2022, Harmony Horizon In the incident, $96 million was washed away.

● In August 2022, at least $7.8 million was transferred in the Nomad incident.

OFAC believes that these illegal funds were used to fund North Korea's missile and nuclear weapons programs, and therefore sanctions were imposed on Tornado Cash.

2.2 Impact of sanctions

Sanctions resulted in the blockade of Tornado Cash's smart contract address, which many users and developers were unable to access its funds. This move sparked strong opposition from the blockchain community, believing that it violated privacy rights and freedoms of open source technology.

3. Legal litigation and industry stance: The game between technology and law

In August 2023, the U.S. Department of Justice filed a criminal lawsuit against Tornado Cash co-founders Roman Storm and Roman Semenov, accusing them of "conspiring to launder money, operating funds without permission to transfer business and violating sanctions regulations."

3.1 Opposition from industry organizations

● Coin Center pointed out that treating the development of open source software as a crime is a suppression of technological innovation.

● Coinbase Two main arguments are proposed:

(1) OFAC's actions violate the International Emergency Economic Powers Act (IEEPA) because smart contracts do not belong to anyone's property and should not be sanctioned.

(2) The prohibition of open source code violates the First Amendment of the United States Constitution, and the code should be protected by freedom of speech.

3.2 Web3 Industry Position

● Tornado Cash's smart contracts are open source and non-changeable, and no individual or entity can control its operation.

●The Ministry of Finance attempts to classify Tornado Cash as an entity related to a foreign country, but the agreement does not meet the definition of a legal entity.

●The sanctions violate the First Amendment of the Constitution because the code should be regarded as a form of speech and protected by law.

4. The court's ruling to overturn sanctions

In January 2025, the US Texas court ruled that Tornado Cash's sanctions were invalid, believing that the smart contract is not sanctionable property, and requested that it be removed from the SDN list. The key to the court's judgment is to point out:

●Smart contracts do not meet the legal definition of property.

● OFAC exceeded its statutory authority in this case.

This ruling is regarded as an important victory for the blockchain industry and also provides legal precedent for similar cases.

V. Latest progress: Tornado Cash removed from the SDN list

On March 21, 2025, Tornado Cash was finally removed from the "Specially designated and blocked persons list (SDN)". The incident marked an important victory for its supporters and also highlighted the controversy that continues to exist between balancing security measures and freedom of speech in the development of digital privacy, regulation and cryptocurrencies.

5.1 Market Reaction

After news that the U.S. Treasury Department removed Tornado Cash from its sanctions list, the price of TORN token soared over 70% in a short period of time, returning to the $15 price level. Its weekly increase also exceeded 100%, becoming the leader in the privacy token field. This market response not only reflects investors' optimistic expectations for the future development of Tornado Cash, but also highlights theThe important position of privacy technology in the cryptocurrency market.

5.2 Impact on privacy tokens and the DeFi sector

The unblocking of Tornado Cash is regarded as a major victory in privacy tokens and decentralized finance (DeFi). This incident not only provides a looser regulatory environment for the development of privacy technology, but may also trigger an overall rebound in the privacy token field in the coming days. Recovering investor confidence in privacy technology may drive more capital flows into related projects.

VI. Beosin pays attention to sanctions risks

As a leader in blockchain security compliance, Beosin always pays attention to the latest trends in regulation. The removal of sanctions against Tornado Cash, Beosin has made corresponding adjustments to its labeling system. Users can manually specify Tornado Cash as a risk entity in product configuration (Tornado Cash originally had a sanction tag, but it should also be paid attention to as a mixing service) and set corresponding rules.

6.1 Beosin KYT Tag Data

In addition to the OFAC list, Beosin KYT also covers the following sanctions list:

●United Nations Security Council sanctions list

●United States Comprehensive Sanctions List

●EU Comprehensive Sanctions List

●UK HM Treasury OFSI Sanctions List

●MAS Specify a list of individuals and entities

●SFC list

6.2 Risk Rule Configuration

Users can customize risk rules through the Beosin KYT platform to monitor transaction behaviors related to Tornado Cash in real time to ensure compliance and security.

Written at the end

Tornado Cash's story is not only a game of technology and regulation, but also a competition of privacy and security, freedom and control. With the continuous development of blockchain technologyDevelopment, how to protect privacy while preventing illegal activities will become a common challenge for the industry and regulators. The process of Tornado Cash from sanctions to lifting the ban provides valuable experience and inspiration for solving this problem. In the future, with the further integration of law and technology, the blockchain industry is expected to find a better balance between compliance and innovation.