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Tornado Cash and Blockchain Privacy: A Primer for Economists and Policymakers

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Abstract

This article explores non-custodial crypto asset mixers such as Tornado Cash. We analyze what types of mixers exist and how they work. We discuss opportunities and risks and offer an approach, based on voluntary disclosure, that would allow financial market regulators to combat money laundering and illicit activities, while allowing honest users to interact with privacy-enhancing protocols. We explain how crypto asset mixers play an important role on public blockchains and that privacy may be difficult to attain without them.

Suggested Citation

  • Matthias Nadler & Fabian Schär, 2023. "Tornado Cash and Blockchain Privacy: A Primer for Economists and Policymakers," Review, Federal Reserve Bank of St. Louis, vol. 105(2), pages 122-136, April.
    • Handle: RePEc:fip:fedlrv:95610
    DOI: 10.20955/r.105.122-136
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    Cited by:

    1. Casey Watters, 2023. "When Criminals Abuse the Blockchain: Establishing Personal Jurisdiction in a Decentralised Environment," Laws, MDPI, vol. 12(2), pages 1-16, April.

    More about this item

    Keywords

    cryptoassets; blockchain;

    JEL classification:

    • B27 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - International Trade and Finance
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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