The Tornado Cash decision has chilling implications for the crypto industry.

The guilty verdict of Alexey Persev, the developer of the coin-mixing protocol Tornado Cash, comes from a nuanced interpretation of criminal liability that could have broader implications for crypto.

The Dutch court's guilty verdict means Percev will now face five years and four months in prison for money laundering through Tornado Cash. This happened even though Percev was not directly involved in the fishing.

Andrew Balthazar, a litigator with the Holland & Knight law firm, spoke to Cointelegraph to explain the implications of the ruling.

“The Perceive judgment reinforces the view of many governments that software developers who make their software available to the public are responsible for the consequences of the public's use of the software,” Balthazar said.

“Under this theory of liability, denial of knowledge of a specific criminal act or technical limitations of software is no defense against the misuse of software by criminal actors. […] It is the responsibility of the developer to develop methods to reduce or prevent the use of foreseeable software crimes.

When asked if governments that hold that view have included the U.S. Balthazar, he said, “Yes, that seems to be the U.S. position, as seen in the Tornado money case brought domestically by the DOJ — [Department of Justice]He said.

This interpretation of accountability differs greatly from how most people understand it in its traditional context. Natalia Latka, director of public policy and regulatory affairs at blockchain analytics firm Merck Science, told Cointelegraph how the theory has evolved over time.

“Historically, software developers were seen as independent creators of tools and platforms, responsible for their technical functionality but not how those tools were used,” Latka said.

“This view is largely rooted in the idea that the technology itself is independent, and its use depends on the needs of the users. This view is changing, especially with the rise of decentralized networks that challenge traditional regulatory frameworks.”

Latka explains that developers “must now consider the legal implications and potential abuse of their inventions.”

Crypto understands the impact of court decisions

The crypto community quickly grasped the significance of Perceive's trial and took to social media to condemn the verdict.

Eléonore Blanc, founder of CryptoCanal – the firm behind the events of the ETHDam conference in Amsterdam – took to X to discuss the implications of the experiment on social media. She thought experimented to ask that “Tornado Cash” could not simply be “any cryptocurrency of your choice”.

Blank told Cointelegraph why she's looking into the matter.

“They systematically ignored all the arguments from the defence,” she said. “Thus, you can easily see how this particular court decision translates to greater leverage in the crypto industry.

Blank went on to make his verdict on X even more personal, saying, “As crypto builders, we are all Alexey. We fight for him, his legacy and the values ​​of cypherpunk.

Future, another member of the X community, went on to consider what this accountability model would mean if applied outside of software development.

Balthazor argues that if community members instinctively know how dangerous the ruling is to privacy, there may be additional problems to consider.

The dangers of immutability and decentralization

The Tornado Cash decision may be the first and most obvious harm to privacy, but that is not the only challenge arising from the case. The immutability of blockchain and smart contracts is also at risk.

“This concept of accountability makes it too risky for developers to make immutable smart contracts publicly available,” Balthazor said.

“Reducing the risk to developers may require software developers to modify publicly available programs to respond to the requirements of law enforcement or regulators.”

“For example, certain stablecoin issuers have a feature that allows stablecoins to blacklist blockchain addresses controlled by authorized parties. Failure to include such a feature increases the risk of those stablecoin issuers being exploited by authorized parties,” he said.

“The judgment increases the risks associated with decentralized projects,” Balhazor concluded.

Turning the screws

With Percev accepting such a fine, it's understandable if blockchain developers are now worried about potential legal action.

Latka said that “compliance by design” in the crypto space “will be critical for developers and organizations. This includes incorporating regulations into the design and development process from the beginning.”

Because “courts evaluate whether developers knowingly created devices for illegal purposes or were willfully blind to their misuse, both intent and negligence are evidence that greatly affects legal outcomes.”

But if developers have to sacrifice privacy, immutability and decentralization to protect themselves and respect their protocols by design, what is left of blockchain?