US Treasury Department Reverses Sanctions on Tornado Cash

The United States Treasury has officially removed Tornado Cash, an Ethereum-based coin mixing service, from its list of sanctioned entities. This move marks a big change after the Treasury’s Office of Foreign Assets Control blacklisted the platform in 2022. 

In a statement, the department said it made this decision after reviewing the legal and policy issues raised regarding the platform. It considered how financial bans affect new technology and changing legal systems.

Legal Challenges Forced the Treasury’s Hand 

Last November, the U.S. Court of Appeals for the Fifth Circuit challenged the Treasury’s decision to sanction Tornado Cash. The court said the department had overstepped its authority by targeting the mixing platform’s smart contract. 

The court ruled that Tornado Cash operates as autonomous software and cannot be treated as property. Therefore, it could not be sanctioned under current laws. Even after this ruling, the Treasury did not immediately remove the sanctions. 

The Justice Department asked for a 60-day delay, pushing the final decision to mid-March 2025. The sanction caused an uproar in the crypto industry. In 2023, Coinbase played a major role in challenging the government’s actions. The crypto exchange argued that banning Tornado Cash was unfair. 

Paul Grewal, Coinbase’s Chief Legal Officer, was also vocal about the delay and its impact on the crypto industry.  

Tornado Cash and the Fight Against Money Laundering

Even after lifting the sanctions, the Treasury Department still worries about the platform’s involvement in illegal activities. Tornado Cash was initially sanctioned because authorities believed it was used to launder crypto assets worth billions of dollars.  

The officials claimed that criminals, including North Korean hackers, used the platform to move stolen money. The Treasury said it supports new financial technology. Nevertheless, it must also prevent criminals from misusing it.

Additionally, Treasury Secretary Scott Bessent emphasized keeping digital assets safe while allowing new technology to grow. Despite the raised concerns, the court ruling clarified that the Treasury cannot legally ban the software.

The Tornado Cash Controversy Continues 

Even with legal battles and government sanctions, it was revealed that the mixer was never actually shut down. The protocol remained accessible, frustrating lawmakers who wanted it permanently disabled. 

Ethereum co-founder Vitalik Buterin publicly admitted to using the service to send private donations in support of Ukraine. 

Tornado Cash co-founder Roman Storm is still facing legal trouble. He was arrested in 2023 and is awaiting trial on money laundering charges. The court has denied Storm’s request to have his case dismissed.

Meanwhile, Tornado Cash developer Alexey Pertsev has been released from prison. However, he will remain on house arrest while preparing for his legal appeal following nearly 18 months of incarceration.