Ethereum’s Oxbow Privacy Pools Debut – But Can It Avoid Tornado Cash’s Fate?

Ethereum Privacy:- Oxbow, the privacy-focused infrastructure provider founded in 2023, announced the mainnet launch of its Privacy Pools on Ethereum this Monday.

Ensuring privacy in the transparent transactions of blockchain has been a major focus for the crypto community and its leaders. In a step toward addressing this, the newly launched Oxbow Privacy Pools aim to provide privacy for user transactions on Ethereum, the second-largest blockchain by market capitalization.

However, privacy tools have always attracted the attention of regulators, as the case of Tornado Cash is still fresh in our memories, with its sanctions lifted last week only. This raises a key question: Will Oxbow’s new privacy pool on Ethereum be able to avoid regulatory scrutiny?

But first, let’s explore what Oxbow’s new Privacy Pools are all about.

What Are Oxbow’s Privacy Pools on Ethereum?

Privacy Pools are cryptographic tools designed to break the link between the sender’s and receiver’s addresses, hiding user identities and maintaining transaction anonymity.

By leveraging zero-knowledge proofs (ZKPs), Oxbow’s Privacy Pools is allow users to make private transactions on Ethereum without revealing sensitive data to the public blockchain. Notably, ZKPs are a type of cryptographic technology that enables one party to prove the validity of a statement without revealing the underlying data, for a strong level of privacy.

Currently, Oxbow is allowing users to deposit up to 1 ETH due to the launch being in its initial stages.

gm Ethereum ☀️

It is our great honor to announce the mainnet launch of Privacy Pools!

ETH users can now achieve on-chain privacy, while still dissociating from illicit funds

It is now up to all of us to Make Privacy Normal Again 🫡

More info in this thread 👇 pic.twitter.com/3nJO0AxoD1

— 0xbow.io (@0xbowio) March 31, 2025

One distinguishing feature of its privacy solution is that it screens deposited assets before allowing them into its wallets using an Association Set Provider (ASP). This helps prevent potentially illicit funds from entering the system, ensuring regulatory compliance.

To date, over 21 ETH has been transferred through Oxbow Privacy Pools, including a notable transaction from Vitalik Buterin, Ethereum’s co-founder and one of the blockchain privacy proponents.

Further, as per the revelation, the architecture of Oxbow’s Privacy Pools is inspired by a 2023 white paper written by Vitalik Buterin, Jacob Illum, Matthias Nadler, and two other academics. The paper proposed a system in which users only reveal certain properties of their transactions to maintain privacy while still providing necessary transparency.

Notably, in February, Buterin also suggested that ETH blockchain could consider the Poseidon hash function to improve the platform’s efficiency.

Can Oxbow Avoid the Fate of Tornado Cash?

According to the Chainalysis 2025 Crypto Crime report, during the last year, addresses associated with illicit activities received approximately $40.9 billion in cryptocurrency. This explains the reason for the continuous suspicion of regulatory agencies on privacy protocols which hide the origin of transactions even if “illicit”.

The downfall of Tornado Cash, one of the most popular Ethereum-based privacy mixers, serves as a cautionary tale for privacy tools in the blockchain ecosystem. Tornado Cash was sanctioned by the U.S. Treasury Department in 2022, accused of facilitating money laundering and acting as a haven for illicit actors.

The sanctions were a major blow to the privacy and DeFi communities, however, the regulatory landscape surrounding these tools has been evolving. Tornado Cash was removed from the U.S. sanctions list recently on March 22 following a Nov 2024 court ruling that questioned the legality of the sanctions.

This shift could signal a new era for privacy tools, but it also raises questions about how new future tools such as Oxbow’s, will be regulated.

Notably, Oxbow is already emphasising on regulatory compliance. Unlike Tornado Cash, which was criticized for lacking mechanisms to prevent illicit use, Oxbow has passed a successful audit from Audit Wizard and is incorporating Know Your Transaction (KYT) checks while closely monitoring deposits.

These measures aim to ensure that its privacy pools are not used for money laundering, terrorism financing, or other illegal activities. This focus on compliance can make Oxbow’s approach regulator friendly in a space where privacy solutions have often been viewed with suspicion by regulators.

Thus, whether it will avoid the same pitfalls that brought Tornado Cash down remains to be seen, but the stakes are high – the spotlight is on Oxbow to prove that privacy and compliance can coexist in the world of blockchain.