The Impact of Sanctions on decentralised Privacy Tools: A Case Study of Tornado Cash
Abstract
This paper investigates the impact of sanctions on Tornado Cash, a smart contract protocol designed to enhance transaction privacy. Following the U.S. Department of the Treasury's sanctions against Tornado Cash in August 2022, platform activity declined sharply. We document a significant and sustained reduction in transaction volume, user diversity, and overall protocol utilization after the sanctions were imposed. Our analysis draws on transaction data from three major blockchains: Ethereum, BNB Smart Chain, and Polygon. We further examine developments following the partial lifting and eventual removal of sanctions by the U.S. Office of Foreign Assets Control (OFAC) in March 2025. Although activity partially recovered, the rebound remained limited. The Tornado Cash case illustrates how regulatory interventions can affect decentralized protocols, while also highlighting the challenges of fully enforcing such measures in decentralized environments.
Keywords
Cite
@article{arxiv.2510.09443,
title = {The Impact of Sanctions on decentralised Privacy Tools: A Case Study of Tornado Cash},
author = {Raffaele Cristodaro and Benjamin Kraner and Claudio J. Tessone},
journal= {arXiv preprint arXiv:2510.09443},
year = {2025}
}
Comments
This paper has been withdrawn by the author due to mistakes in the references. A corrected version will be prepared