Treasury lifts sanctions on crypto mixer Tornado Cash following legal challenge
The US Treasury Department has removed sanctions on cryptocurrency mixer Tornado Cash, citing ‘novel legal and policy issues raised by use of financial sanctions against financial and commercial activity occurring within evolving technology and legal environments,’ according to a 21 March announcement.
‘We have exercised our discretion to remove the economic sanctions against Tornado Cash as reflected in Treasury’s Monday filing in Van Loon v. Department of the Treasury,’ the notice stated.
The delisting follows a November 2024 decision by the US Court of Appeals for the Fifth Circuit, which ruled that the Treasury’s Office of Foreign Assets Control (‘OFAC’) had exceeded its authority in sanctioning Tornado Cash’s autonomous software code under the International Emergency Economic Powers Act (‘IEEPA’). The case was brought by six Tornado Cash users in a lawsuit backed by cryptocurrency exchange Coinbase.
Though OFAC designated the service in August 2022 for allegedly helping North Korean hackers launder stolen cryptocurrency, according to the November ruling the autonomous nature of the software placed it beyond Treasury’s sanctioning authority.
Despite lifting sanctions in its latest action, Treasury emphasised ongoing concerns about North Korean exploitation of digital assets, saying it ‘remains deeply concerned about the significant state-sponsored hacking and money laundering campaign aimed at stealing, acquiring, and deploying digital assets for the Democratic People’s Republic of Korea (DPRK) and the Kim regime.’
Treasury Secretary Scott Bessent said, ‘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.’
The Tornado Cash sanctions were initially imposed in 2022 with OFAC claiming the service was used to launder more than $7 billion worth of virtual currency since 2019, including $455 million allegedly stolen by North Korean hackers. The sanctions were later expanded to include Tornado Cash co-founders Roman Semenov and Roman Storm in August 2023.
The Treasury Department said it ‘will continue to monitor closely any transactions that may benefit malicious cyber actors or the DPRK,’ and warned that ‘U.S. persons should exercise caution before engaging in transactions that present such risks.’
