The Tornado Cash case has become a focal point in the crypto community over the past two years, involving the nerves of many. It is not just a legal case but a ultimate showdown over open-source code, free speech, and financial privacy.

Let's start from the perspective of sanctions. The U.S. Department of the Treasury, based on IEEPA, listed Tornado Cash as an "entity" through OFAC, attempting to classify smart contracts as "property." It sounds reasonable, but the question arises—can open-source code and immutable contracts truly be sanctioned? The court's final ruling is quite interesting: code is speech, not property. This decision directly exposes the regulatory logic loophole.

On the criminal level? The Department of Justice has charged individual developers. The core issue isn't "you wrote the code," but "are you operating an unlicensed money transmission business?" Prosecutors claim that developers profited from the protocol and knew users would use it for illegal activities. The defense firmly denies this—since open-source software release is protected by the First Amendment, developers have long relinquished control. The jury's divided opinion reflects how complex this matter is; the gap between technical details and legal definitions is significant.

The key questions are: should developers be responsible for user actions? Is the definition of DAO members too broad, including even those holding TORN tokens? These questions have no simple answers.

The impact is quite substantial. For open-source developers, the Tornado Cash case serves as a warning—even if you relinquish control, you could still be held liable if users misuse the tool. This directly affects the development ecosystem of DeFi and privacy tools. The industry is beginning to push for legislation like the CLARITY Act, aiming to provide developers with a clear exemption framework.

From a regulatory perspective, balancing innovation and security has become a core challenge. OFAC's loss redefines what constitutes "property" subject to sanctions, but this does not affect anti-money laundering enforcement. The crypto community views this victory as a major win for "free speech," but regulators worry that privacy tools could facilitate crime. Tools like Samourai Wallet have also faced scrutiny. Usage of privacy coins like Zcash and Monero is increasing, but enforcement efforts are intensifying. Notably, the SEC concluded its investigation into Zcash in 2026 without taking enforcement action.

On the political front, this issue is also quite interesting. The Republican Party tends to favor protecting innovation and free speech, while the Democratic Party emphasizes regulation and risk prevention. The Tornado Cash case has gradually evolved into a symbolic debate between a "surveillance state" and "financial privacy."

What is the current situation? The Tornado Cash protocol is still operational and cannot be shut down; it has processed $2.5 billion in transactions. Storm faces deadlock charges and may be retried. Semenov is on the run, Pertsev is in custody. The Fifth Circuit Court's ruling may be appealed to the Supreme Court, and the Eleventh Circuit case is still pending. Overall, this litigation is reshaping the legal framework for decentralized technologies, but the boundaries of developers' responsibilities remain blurry. This issue will continue to trouble the industry.