Core Insights - Sanctions on crypto protocols, particularly Tornado Cash, have proven effective in reducing illicit activities, with a reported 60% decrease in monthly volumes following the 2022 sanctions [2] - The lifting of sanctions in March and proposed new regulations may create a more lenient environment for developers of similar protocols, potentially excluding them from anti-money laundering (AML) and bank secrecy regulations [3][4] - Critics express concerns that the new regulatory framework could facilitate the creation of unregulated crypto mixing services, leading to increased illicit finance activities [5] Group 1: Impact of Sanctions - The 2022 sanctions by the Office of Foreign Assets Control on Tornado Cash, which facilitated over $7 billion in illicit funds, resulted in a significant 60% drop in monthly transaction volumes [2] - Exchanges have actively blocked interactions with addresses linked to Tornado Cash, indicating a strong response to the sanctions [2] Group 2: Regulatory Changes - Proposed clauses in the Senate Banking Committee's market structure bill suggest that developers of smart contracts without unilateral control would not be classified as money transmitters, thus avoiding AML and Bank Secrecy Act (BSA) requirements [3] - Centralized entities or businesses built on top of such protocols would still be subject to these regulations, highlighting a distinction in regulatory treatment [4] Group 3: Legal Consequences and Future Implications - The co-founder of Tornado Cash was found guilty of operating an unlicensed money transmitting business, while similar founders faced similar charges, indicating the legal risks associated with these protocols [4] - Experts believe that the new regulatory framework could protect future developers from facing serious legal challenges, although critics warn it may lead to the emergence of unregulated services [5]