The Department of Treasury has removed sanctions imposed on Tornado Cash, the Ethereum-based smart contract mixer, after a series of judicial setbacks and administrative hurdles.
“Following the Administration’s assessment of the unprecedented legal and policy matters raised by the application of financial sanctions on economic and commercial activities within rapidly changing technological and legal frameworks, we have decided to retract the economic sanctions against Tornado Cash as outlined in Treasury’s filing on Monday in Van Loon v. Department of the Treasury,” the Treasury Department asserted.
Brief Summary of the Tornado Cash Narrative
Tornado Cash was introduced in 2019 as a decentralized protocol aimed at enhancing transaction confidentiality on Ethereum.
In August 2022, the mixer was included in the Office of Foreign Assets Control (OFAC) list, which comprises sanctioned individuals and entities. U.S. law enforcement claimed that Tornado Cash facilitated over $7 billion in money laundering, involving funds associated with 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 charged in 2023 for money laundering linked to over $1 billion in transactions.
Six users of Tornado Cash, supported by Coinbase, filed a lawsuit against the Treasury, contesting the sanctions.
A Texas federal court declared in January 2025 that the smart contracts could not be sanctioned, a ruling upheld by the Fifth Circuit in November 2024.
Today the Treasury officially rescinded the sanctions, citing developing legal and technological factors, while also expressing concerns regarding ongoing illegal crypto activities and reiterated its determination and authority to maintain DPRK sanctions.
Ongoing Tensions
The Treasury, however, reiterated its commitment to enforcing sanctions against the Democratic People’s Republic of Korea (DPRK), which remains a source of geopolitical tension, particularly in light of the recent hack valued at over $1 billion from Bybit, alleged to have been carried out by Lazarus, a hacking group connected to the DPRK.
“We continue to be extremely concerned about the considerable state-sponsored hacking and money laundering operations targeting the theft, acquisition, and utilization of digital assets for the Democratic People’s Republic of Korea (DPRK) and the Kim regime,” the agency remarked.
“Treasury will persist in closely monitoring any transactions that could benefit malicious cyber actors or the DPRK, and U.S. individuals should exercise prudence before engaging in transactions that pose such risks.”
While the revocation of the sanctions is seen as positive for developers of financial privacy software, it remains premature to ascertain the impact on the Bitcoin and crypto sector broadly, or whether it will influence forthcoming legal cases such as those involving the Samurai Wallet developers.
“Digital assets offer tremendous opportunities for innovation and value generation for the American populace,” stated Secretary of the Treasury Scott Bessent. “Safeguarding the digital asset industry from misuse by North Korea and other unlawful actors is critical to reinforcing U.S. leadership and ensuring that the American populace can reap the benefits of financial innovation and inclusion.”
