WASHINGTON D.C. – The U.S. Department of the Treasury officially lifted economic sanctions against cryptocurrency mixer Tornado Cash on March 21, 2025, reversing a controversial designation made in August 2022. This decision followed a November 2024 ruling by the U.S. Fifth Circuit Court of Appeals, which determined that the Treasury's Office of Foreign Assets Control (OFAC) had overstepped its authority in sanctioning the decentralized protocol's immutable smart contracts.
The initial sanctions were imposed due to allegations that Tornado Cash had been used to launder over $7 billion in illicit funds, including significant amounts for North Korea's state-sponsored Lazarus Group. The Treasury had argued that the mixer facilitated criminal activity by obscuring transaction origins and destinations on the Ethereum blockchain.
Jake Chervinsky, Chief Legal Officer at crypto VC firm Variant and a prominent voice in the cryptocurrency legal community, strongly emphasized the significance of this legal battle. In a widely circulated tweet, Chervinsky stated, > "You either get why the fight for Tornado Cash is existential for crypto, or you don't get crypto." His perspective highlights the industry's view that the case was a critical test for open-source software development, financial privacy, and the broader decentralization ethos within the crypto space.
The Fifth Circuit's ruling centered on the argument that Tornado Cash's immutable smart contracts do not constitute "property" subject to sanctions under the International Emergency Economic Powers Act (IEEPA), as there is no controlling entity. This legal interpretation set a significant precedent for how decentralized protocols might be regulated, potentially limiting the government's ability to sanction code itself rather than individuals or traditional entities.
Despite the lifting of the protocol's sanctions, the legal challenges for individuals associated with Tornado Cash persist. Co-founders Roman Storm and Roman Semenov continue to face separate federal charges in the U.S. for money laundering and sanctions violations. Additionally, developer Alexey Pertsev was sentenced to over five years in prison in the Netherlands in May 2024 on money laundering charges related to the mixer. The ongoing individual cases underscore the complex and evolving legal landscape surrounding decentralized finance and privacy-enhancing technologies.