Coin Mixers and the Privacy Debate

Coin mixers have captured the attention of both the cryptocurrency community and regulators as the battle for privacy ramps up.

In 2021, the founder of coin mixer Bitcoin Fog was arrested on charges including money laundering and operating a money transmission business without a license.

A year later, the U.S. Treasury Department issued sanctions against Tornado Cash, an Ethereum coin mixing service, effectively banning Americans from using it.

In a landmark ruling in November 2024, the U.S. Fifth Circuit Court ruled that the Treasury had overstepped by sanctioning Tornado Cash’s smart contracts, although its broader designation remained intact.

In a reversal of its 2022 decision, the Treasury announced in March 2025 that it had delisted Tornado Cash from its sanctioned parties list.

What is a Coin Mixer, and Why Use Them?

A coin mixer is a service that allows users to obfuscate the origin and destination of transactions. Users send cryptocurrency to the service, have that crypto mixed with other coins or tokens, and then send the equivalent amount of “mixed” coins to a recipient address, hiding the connection between sender and recipient.

There are many legitimate uses for this type of service. For instance, just as you may want privacy in your bank transactions, you might also want to keep your crypto activities private. However, as the adoption of crypto grows, real-world identities are increasingly linked to blockchain addresses. This is where coin mixers provide an advantage.

Despite their legitimate uses, coin mixers are often tools for cybercriminals, making them a target for law enforcement. While politicians have criticized cryptocurrency use in illegal activities, coin mixers sit in a gray area between facilitating money laundering and protecting privacy. Privacy advocates stress the importance of coin mixers for activities that carry risks, such as journalism and protests.

Legal Reasons to Use Tornado Cash

• You get paid in crypto and prefer privacy regarding your financial details.
• You pay for a service in ETH and don’t want the provider to see your full transaction history.

Law Enforcement Perspective

Law enforcement and government agencies view coin mixers like Tornado Cash as methods for criminals to launder money using cryptocurrency. The Treasury Department has highlighted that Tornado Cash processed over $7 billion in virtual currency since its inception, with around $1.5 billion connected to illicit activity, including funds stolen by the Lazarus Group.

Tornado Cash Sanctions

The Treasury’s sanctions against Tornado Cash included bans on GitHub resources and funding services linked to the mixer. However, legal challenges ensued, leading the Fifth Circuit Court to determine that Tornado Cash’s smart contracts could not be classified as property.

In March 2025, the Treasury reversed its sanctions against Tornado Cash, citing novel legal and policy considerations concerning evolving technology.

Examples of Coin Mixers

• Tornado Cash: Launched in 2019, sanctioned by the Treasury in 2022.
• Samourai Wallet: A Bitcoin-only mixer founded in 2015, its founders were arrested in 2024.
• Wasabi Wallet: Established by zkSNACKs in 2018, it blocked U.S. users in 2024 after legal issues.
• Bitcoin Fog: A custodial mixer founded in 2011, convicted of money laundering in 2024.

How Do Coin Mixers Work?

Coin mixers facilitate anonymized transactions by pooling multiple deposits together, ensuring the withdrawal address does not trace back to the original sender. Many of these mixers are non-custodial, meaning no third party manages the funds.

Coin Mixers: A Timeline

• 2011: Launch of Bitcoin Fog.
• 2019: Tornado Cash is launched.
• 2021: U.S. arrests Bitcoin Fog operator.
• 2022: Sanctioning of Tornado Cash.
• 2024: Legal actions against Bitcoin Fog and Samourai Wallet founders.
• 2025: U.S. Treasury lifts sanctions against Tornado Cash.

Legitimate Use Cases

A hypothetical example showcases a business owner using Tornado Cash to send Ethereum to a group without revealing his identity.

The Future of Coin Mixers

The conversation about privacy in cryptocurrency remains heated. The court’s ruling that smart contracts cannot be considered property is viewed as significant progress for crypto advocates. However, upcoming projects, like Railgun, are being developed to allow for on-chain privacy while aligning with legal requirements. The ongoing debate will shape the future landscape of privacy in cryptocurrency, with advocates continuing to address privacy rights in the digital realm.

This article was originally written in August 2022 and updated in March 2025.