The Problem Tornado Cash Raises About Base Layer Censorship on Ethereum

On an otherwise quiet day last month, the crypto industry woke up to big news – the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) added 45 public Ethereum addresses to the sanctions blacklist, including addresses where the Tornado Cash byte code, or smart contract, was stored, potentially rendering interactions with those addresses a violation of law. Up to this point, all addresses included on the Specially Designated Nationals and Blocked Persons List (SDN List) had been wallets purportedly belonging to known “bad actors,” making the Tornado Cash sanctions an unprecedented expansion of sanctions law.