The U.S. Department of Treasury has lifted sanctions on Tornado Cash, the Ethereum-based mixer, after a series of legal defeats and administrative reviews. The decision reflects a nuanced understanding of the challenges posed by financial sanctions in an evolving technological landscape. In its announcement, the Treasury highlighted, "Based on the Administration’s review of the novel legal and policy issues... we have exercised our discretion to remove the economic sanctions against Tornado Cash."
Tornado Cash was launched in 2019 to allow users to enhance transaction privacy on the Ethereum network. However, in August 2022, it faced sanctions from the Office of Foreign Assets Control (OFAC), accused of facilitating over $7 billion in money laundering, with connections to North Korea's Lazarus Group. This resulted in a ban on U.S. individuals using the service and legal actions against its co-founders, who were indicted in 2023.
The legal battle intensified when six Tornado Cash users, backed by Coinbase, sued the Treasury, stating that the sanctions violated their rights. A Texas federal court agreed in January 2025, ruling that the smart contracts themselves could not be sanctioned. The Fifth Circuit upheld this decision in November 2024, leading to today’s official removal of sanctions by the Treasury, which nonetheless expressed ongoing concerns about illicit activities associated with cryptocurrencies.
Despite this lifted ban, the Treasury affirmed its commitment to enforcing sanctions against North Korea, stating, "We remain deeply concerned about significant state-sponsored hacking and money laundering campaigns aimed at stealing digital assets for the DPRK." This highlights the agency's dual focus on fostering innovation while combating illicit use of digital assets.
For crypto users and enthusiasts, this development may indicate a move towards greater recognition of financial privacy tools in regulatory frameworks. However, caution is advised as U.S. individuals continue to face potential risks associated with transactions that could involve malicious actors. Treasury Secretary Scott Bessent remarked, "Securing the digital asset industry from abuse by North Korea and other illicit actors is essential to establishing U.S. leadership in this space."
This change represents a potential shift for financial privacy solutions within crypto, but its broader implications remain uncertain. The outcome of related legal cases, such as those involving Samurai Wallet developers, will also be watched closely for further insights into the future of digital asset regulations.
Tornado Cash was launched in 2019 to allow users to enhance transaction privacy on the Ethereum network. However, in August 2022, it faced sanctions from the Office of Foreign Assets Control (OFAC), accused of facilitating over $7 billion in money laundering, with connections to North Korea's Lazarus Group. This resulted in a ban on U.S. individuals using the service and legal actions against its co-founders, who were indicted in 2023.
The legal battle intensified when six Tornado Cash users, backed by Coinbase, sued the Treasury, stating that the sanctions violated their rights. A Texas federal court agreed in January 2025, ruling that the smart contracts themselves could not be sanctioned. The Fifth Circuit upheld this decision in November 2024, leading to today’s official removal of sanctions by the Treasury, which nonetheless expressed ongoing concerns about illicit activities associated with cryptocurrencies.
Despite this lifted ban, the Treasury affirmed its commitment to enforcing sanctions against North Korea, stating, "We remain deeply concerned about significant state-sponsored hacking and money laundering campaigns aimed at stealing digital assets for the DPRK." This highlights the agency's dual focus on fostering innovation while combating illicit use of digital assets.
For crypto users and enthusiasts, this development may indicate a move towards greater recognition of financial privacy tools in regulatory frameworks. However, caution is advised as U.S. individuals continue to face potential risks associated with transactions that could involve malicious actors. Treasury Secretary Scott Bessent remarked, "Securing the digital asset industry from abuse by North Korea and other illicit actors is essential to establishing U.S. leadership in this space."
This change represents a potential shift for financial privacy solutions within crypto, but its broader implications remain uncertain. The outcome of related legal cases, such as those involving Samurai Wallet developers, will also be watched closely for further insights into the future of digital asset regulations.
