Academic paper examines the impact of U.S. Treasury sanctions on Tornado Cash privacy protocol.
Regulation & Gov ·
An academic paper on arXiv has examined how U.S. Treasury sanctions against Tornado Cash affected the privacy-focused smart contract protocol. The analysis tracked transaction data across Ethereum, BNB Smart Chain, and Polygon following the August 2022 sanctions and their partial lifting and removal by the Office of Foreign Assets Control in March 2025. The study documents a sharp and sustained decline in transaction volume, user diversity, and protocol utilization after sanctions took effect.
The research illustrates the mechanics of regulatory enforcement against decentralized infrastructure. Although activity partially recovered following the March 2025 removal of sanctions, the rebound remained limited relative to pre-sanction levels, suggesting lasting impact on user behavior and protocol adoption even after regulatory measures were lifted.
The paper—withdrawn from arXiv by its author—does not specify the total magnitude of the decline or the degree of partial recovery, leaving open questions about the precise quantitative impact and whether activity normalizes over time.