The Department of Treasury has removed the sanctions on Tornado Cash, the Ethereum-based smart contract mixer, after facing several legal setbacks and administrative hurdles.
“Following a review of the unique legal and policy challenges associated with applying financial sanctions to activities within dynamic technological and legal contexts, we have chosen to lift the economic sanctions against Tornado Cash, as stated in Treasury’s recent filing in Van Loon v. Department of the Treasury,” said the Treasury Department.
Brief Summary of the Tornado Cash Narrative
Tornado Cash was introduced in 2019 as a decentralized protocol aimed at improving transaction privacy on Ethereum.
In August 2022, the mixer was included in the Office of Foreign Assets Control (OFAC) sanctions list, which features individuals and entities subject to sanctions. U.S. law enforcement claimed that Tornado Cash was involved in over $7 billion in money laundering activities, including transactions linked to North Korea’s Lazarus Group.
This resulted in a prohibition on U.S. individuals using the service and legal proceedings against its co-founders, Roman Storm and Roman Semenov, who were indicted in 2023 for money laundering associated with more than $1 billion in transactions.
Six users of Tornado Cash, with support from Coinbase, have sued the Treasury, contesting the sanctions.
A Texas federal court ruled in January 2025 that smart contracts could not be sanctioned, a decision upheld by the Fifth Circuit in November 2024.
Today, the Treasury officially rescinded the sanctions, citing evolving considerations in law and technology, although it remained wary of ongoing illicit cryptocurrency activities and reiterated its commitment to enforce sanctions against the DPRK.
Tensions Persist
The Treasury reiterated its commitment to enforcing sanctions against the Democratic People’s Republic of Korea (DPRK), an ongoing source of geopolitical friction, especially following the recent hack valued at over $1 billion, allegedly carried out by Lazarus, a hacking group associated with the DPRK.
“We are seriously concerned about the extensive state-sponsored hacking and money laundering efforts aimed at stealing, acquiring, and utilizing digital assets for the Democratic People’s Republic of Korea (DPRK) and the Kim regime,” the agency stated.
“The Treasury will continue to closely monitor any transactions that could benefit malicious cyber entities or the DPRK, and U.S. individuals should be cautious before engaging in transactions that pose such risks.”
While the lifting of sanctions seems encouraging for developers of financial privacy software, it remains uncertain what implications this will have for the broader Bitcoin and cryptocurrency landscape or any potential impact on ongoing court cases, such as those against the Samurai Wallet developers.
“Digital assets offer tremendous opportunities for innovation and value creation for the American populace,” remarked Secretary of the Treasury Scott Bessent. “Protecting the digital asset sector from exploitation by North Korea and other illicit actors is crucial for establishing U.S. leadership and ensuring that the American people reap the benefits of financial innovation and inclusion.”
