In a major reversal, the U.S. Department of the Treasury has officially lifted its sanctions against Tornado Cash, the Ethereum-based crypto mixer previously accused of facilitating illicit financial flows for North Korea’s Lazarus Group.
The decision follows a November 2024 federal appeals court ruling, which found that the Treasury had overstepped its authority by sanctioning a smart contract-based protocol that, by nature, cannot violate laws on its own.
Tornado Cash: From Sanctioned to Cleared
- Tornado Cash, a decentralized privacy protocol built on Ethereum, allows users to anonymize their transactions by pooling funds before withdrawal.
- In August 2022, the Office of Foreign Assets Control (OFAC) sanctioned the mixer, claiming it was used by North Korea’s Lazarus Group to launder $455 million in stolen crypto, as well as over $7 billion total in illicit funds.
- Coinbase later funded a lawsuit challenging the Treasury’s action, arguing that open-source protocols should not be subject to sanctions.
Federal Court Ruling Changes the Game
- In November 2024, a federal appeals court sided with Tornado Cash, stating that smart contracts are neutral tools and do not inherently violate the law.
- This ruling significantly weakened the Treasury’s legal case, paving the way for the recent reversal.
Treasury’s New Position: Regulatory Clarity Over Blanket Bans
- In its statement, the Treasury acknowledged that Tornado Cash has been removed from the sanctions list and declared the case “moot.”
- Treasury Secretary Scott Bessent emphasized the importance of balancing innovation and national security: “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.”
TORN Token Reacts: Price Nearly Doubles
- Following the Treasury’s announcement, TORN token surged nearly 100%, hitting a high of $15.26 before correcting to $11.82 at press time.
- The price move reflects renewed optimism around decentralized privacy protocols, particularly in an era of increasing surveillance and regulation.
Why This Matters for DeFi and Crypto Regulation
- The decision sets a critical precedent for how the U.S. treats decentralized open-source protocols.
- If regulators begin to distinguish tools from actors, the crypto industry may see more favorable outcomes in future enforcement cases.
- It also highlights the growing importance of legal advocacy in defending crypto innovation—Coinbase’s support for Tornado Cash proved pivotal in shaping the case’s outcome.