Tornado Cash Freed: Treasury Reverses 3-Year Ban on Crypto Mixer
The U.S. Treasury Department has officially removed Tornado Cash and its related wallet addresses from its sanctions list after nearly three years, following legal rulings that challenged the legitimacy of the original designation.
Background
- Tornado Cash, a decentralized crypto privacy protocol built on Ethereum, was sanctioned in August 2022 by the U.S. Treasury’s Office of Foreign Assets Control (OFAC).
- The agency accused the platform of facilitating the laundering of illicit funds, particularly by North Korea’s Lazarus Group, which was said to use stolen crypto assets to support its weapons programs.
- The sanctions sparked widespread backlash within the crypto community, especially among privacy advocates who argued that the move unfairly targeted open-source code rather than specific actors.
- In November 2024, an appeals court ruled that OFAC overstepped its authority in sanctioning the platform, and a U.S. District Court in Texas ordered the reversal of the sanctions in January 2025.
- On Friday, the Treasury Department confirmed the removal of Tornado Cash and several associated digital wallets from the Specially Designated Nationals (SDN) list.
Why should you pay attention?
- This marks a pivotal moment in the debate over privacy, regulation, and decentralization in the crypto industry.
- The reversal sets a legal precedent for the protection of decentralized protocols and open-source development, which many feared would be increasingly threatened by regulatory overreach.
- It also signals a shift in how U.S. institutions might handle future crypto-related enforcement, especially as geopolitical tensions and digital asset adoption continue to evolve.
Who said what?
- Scott Bessent, Secretary of the Treasury, acknowledged the importance of safeguarding innovation while preventing misuse:
“Digital assets present enormous opportunities for innovation and value creation for the American people. Securing the digital asset industry from abuse by North Korea and other illicit actors is essential to establishing U.S. leadership and ensuring that the American people can benefit from financial innovation and inclusion.”
- Meanwhile, privacy advocates and decentralization proponents view the reversal as a major win for open-source developers and the principle of code neutrality.
Zooming out
- The decision to lift sanctions on Tornado Cash is not only legal correction but also a landmark case for the crypto ecosystem.
- The sanctions were initially seen as a warning shot to developers working on privacy-focused technologies, triggering fears that U.S. regulators might begin cracking down indiscriminately on tools rather than the bad actors who misuse them.
- This reversal may now encourage clearer regulatory frameworks that distinguish between infrastructure and intent.
- As countries continue to grapple with the role of digital assets in financial sovereignty, surveillance, and crime prevention, this case will likely serve as a reference point in future legal and political debates surrounding crypto, privacy, and global enforcement standards.
