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Privacy tools — and their limits
- CoinJoin / mixers (e.g. Wasabi, Samourai, Tornado Cash): combine many users’ inputs to obscure the link between sender and recipient. Raise tracing cost but not a guarantee, and increasingly sanctioned or prosecuted.
- Privacy coins (, ): privacy is built into the protocol (ring signatures, stealth addresses, shielded pools). Stronger but some exchanges delist them under regulatory pressure.
- Layer 2 / payment channels (Lightning): channel balances and individual payments aren’t on the base ledger, though channel opens/closes are.
Mixers, sanctions, and the Tornado Cash case
US OFAC sanctioned Tornado Cash in August 2022 (adding it to the SDN list), meaning US persons could face legal liability for interacting with it. In 2024, a US court ruled that immutable smart contracts are not “property” and can’t be sanctioned as such; OFAC subsequently removed Tornado Cash from the SDN list.
The delisting does not make mixer use risk-free: other mixers remain sanctioned (e.g. Blender.io), and most exchanges still flag or refuse mixed-coin deposits under their own AML policies. Privacy tools remain a compliance minefield — the legal landscape is still evolving.