Hasn't precedent already been set for privacy protocols? I know the government tried to stop encryption by listing it as a munition, but they eventually lost that fight on first amendment grounds. It is hard to argue that code is not a kind of speech or expression and thus it gets some of the highest legal protection possible under U.S. law.
Tornado Cash is just a coin mixer implemented through smart contracts yes? The 'coins' themselves already enjoy some first amendment protection by being built on top of the protected encryption protocols. The smart contract itself is just another communication protocol defined in code. So it seems patently obvious that TC is allowed to exist under U.S. law.
The only remaining question is whether anyone can be allowed to use it. We actually have to get deep into first amendment jurisprudence to answer that question. Generally speaking all speech is permitted but, when it is paired with conduct, the conduct can be regulated by time, place, and manner. This at first appears a simple distinction for us. Users of TC or any e-coin standard are _conducting_ transactions. But this is thorny.
Commerce used to be conducted entirely physically with an exchange of cash. Then it was done with an exchange of electronic funds on a banks balance sheet; essentially a change on two different excel spreadsheets. But the btc-protocol and its derivatives don't function like this. They use a ledger. When we transact in e-coins we don't exchange anything. No digital coins fly from my computer to yours or vice versa. Rather all that happens is a message is sent to a public server which contains enough information to allow that server to determine that we both agreed to send that specific message. The server then updates the ledger and publishes this change to other servers hosting the ledger so there is agreement that we exchanged value.
It's not actually 100% clear that when communicating this way we have conducted anything. Sending encrypted messages like this has been determined to be first amendment protected activity as pure speech. Indeed we wouldn't have an internet today if it weren't. Having a message be encrypted inherently provides privacy and precludes restrictions on a message's content. Even when that message's content includes information to exchange value. Citizen's United also has some precedent over whether speech + conduct regarding money transactions are permitted speech when that speech is political in nature.
This leaves us only with the few recognized non-speech categories with which to regulate pure speech:
> lewd, obscene, or pornographic content; defamatory content; insulting or “fighting words”; expressive content that tends to inflict injury; speech that incites an immediate illegal conduct such as riot or violence; speech that poses an imminent threat to public safety or national security; false or misleading commercial advertising; and perjury.
There are a few categories here that may help us. Inciting immediate illegal conduct and imminent threat to public or national security. To qualify as incitement to illegal or a threat to public safety the speech has to pass the 'clear and present danger' test. This test has two parts:
* first, the speech must impose a threat that a substantive evil might follow
* second, the threat is a real, imminent threat.
This test is extremely hard to meet and just because the TC protocol is may be or even if it is likely to be used for money laundering it will likely never rise to the threshold of this test in a U.S. court. Cases where speech does meet this threat are specific threats or instructions. If TC included specific instructions on how to evade law enforcement then that may qualify.
This leaves only threats to national security as a legal basis. We have to begin by saying that many of the use of national security as a means to restrict the rights of Americans has an extremely checkered past. These were the arguments that bullied journalists under the red scare, interned the Japanese in WWII, attempted to stifle the pentagon papers after the Vietnam War, maintained the patriot act of 2001, lead to secret courts with secret evidence, torture, suspension of habeas corpus, etc. However, the standards for what constitutes a threat to national security have been much degraded in the past two decades. You could probably convince a judge or even SCOTUS that the use of TC by foreign hostile powers like North Korea and its potential to be used as a tool of terrorism from the likes of Iran and ISIS constitute a threat to national security. But arguing this not only degrades your moral character, it is also unlikely to be effective in the long term. We did reinstate habeas corpus, we un-interned the Japanese, and we did publish the Pentagon papers. Hopefully we will also get rid of the Patriot Act in the coming decades. And even if TC was determined to be a threat to national security, that determination would likely one day be reversed as an understanding of the technology and its necessity aged into the judicial system.