Tornado Cash Sanctions Lifted by U.S. Treasury, Restoring Access for U.S. Citizens

The US Department of the Treasury has eliminated sanctions previously placed on Tornado Cash, a decentralized cryptocurrency mixing service. This action now permits American citizens to legally utilize it.

This development overturns the August 2022 sanctions issued by the Office of Foreign Assets Control, which accused the platform of enabling money laundering activities, including transactions associated with North Korea's Lazarus Group.

Launched in 2019, Tornado Cash operates on the Ethereum blockchain and provides a protocol to enhance privacy in transactions by allowing users to conceal the sources and recipients of their cryptocurrency transfers.

Although this service is beneficial for individuals seeking financial privacy, it has also been misused by illicit actors to launder funds.

The Treasury Department had claimed that Tornado Cash was utilized to launder over $7 billion in virtual currency, including $455 million stolen by the Lazarus Group.

Treasury Secretary Scott Bessent remarked on the decision, saying, "Digital assets offer immense opportunities for innovation and value creation for the American people. Safeguarding the digital asset industry from exploitation by North Korea and other illicit actors is crucial to establishing US leadership and ensuring that American people can benefit from financial innovation and inclusion."

Free speech concerns

Critics contended that imposing sanctions on open-source software violated free speech and technological advancement. Consequently, a group of Tornado Cash users, backed by Coinbase, a cryptocurrency exchange, filed a lawsuit challenging the sanctions.

In November 2024, a federal appeals court ruled in favor of the plaintiffs, asserting that the Treasury had exceeded its authority. The court emphasized that Tornado Cash's immutable smart contracts did not constitute "property" under federal law, and therefore were beyond the scope of the International Emergency Economic Powers Act.

Judge Don Willett pointed out that while the technology could be misused, it was the responsibility of Congress, not the courts, to revise applicable laws.