Evaluating only Tornado Cash’s profile at its peak — without knowing the outcome — the model ranked Regulation as the #1 likely cause. That’s exactly how it died.
Key Events Timeline
FOUNDING
Tornado Cash founded
REGULATORY ACTION
Regulatory pressure escalates
REGULATORY ACTION
Regulatory Kill: Tornado Cash ceases operations
Full Analysis
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Documented cause
Tornado Cash was an open-source Ethereum privacy protocol that mixed transactions to provide anonymity. It was used legitimately for privacy but also by hackers to launder stolen funds — notably $455 million by the Lazarus Group (North Korea) after the Ronin Bridge hack. On August 8, 2022, the US Treasury's OFAC sanctioned Tornado Cash — the first time a software protocol (not a company or individual) was sanctioned. OFAC added the smart contract addresses themselves to the Specially Designated Nationals list. GitHub removed the repository. Circle (USDC issuer) blacklisted addresses associated with Tornado Cash. The Dutch arrest of developer Alexey Pertsev the same week signaled a new era of developer liability for neutral infrastructure.
Lesson
“Building neutral infrastructure for the internet does not exempt you from liability for its most visible use cases. If your tool is the preferred tool of nation-state hackers, regulators will eventually treat the tool as the threat.”