Tornado Cash Founder Warns DOJ Threatens DeFi Innovation
Roman Storm, co-founder of privacy mixer Tornado Cash, has warned that the US Department of Justice (DOJ) could retroactively prosecute developers of open-source DeFi protocols as unlicensed money service businesses. Storm’s conviction in August for allegedly operating an unlicensed money transmission service has sparked legal uncertainty and fear among DeFi builders, who worry that non-custodial projects may face similar charges.
In response, the Ethereum Foundation and Keyring Network are funding the legal defense of Storm and other Tornado Cash contributors through proceeds from zkVerified vaults. At the American Innovation Project Summit, DOJ acting Assistant Attorney General Matthew G. Galeotti sought to reassure the industry, stating that writing code without illicit intent is not a crime and promising clearer regulatory guidance.
Despite these assurances, the case sets a precedent that could deter talent, slow DeFi innovation and introduce heightened regulatory risk for decentralized finance projects in the US.
Bearish
Storm’s conviction and warning highlight growing regulatory scrutiny in US decentralized finance. In the short term, traders may react by de-risking, reducing allocations to DeFi tokens like TORN and ETH, causing downward price pressure. Long term, ongoing legal uncertainty could deter protocol development, suppressing DeFi growth and token demand. However, DOJ assurances may mitigate some fears, limiting market impact. Overall, heightened compliance risk is likely bearish for DeFi assets until clear guidelines emerge.