US Treasury Lifts Sanctions on Ethereum Mixer Tornado Cash

The U.S. Treasury Department has lifted economic sanctions on Tornado Cash, an Ethereum-based cryptocurrency mixer accused of enabling illicit transactions, including money laundering by North Korean hackers.

The decision, announced on Friday, marks a major shift in the government’s stance on decentralized financial tools after a prolonged legal battle.

JUST IN: 🇺🇸 US Government lifts sanctions and ban on popular crypto Mixer, Tornado Cash pic.twitter.com/qTXOzhHQsn

— Coinwaft (@coinwaft) March 21, 2025

Tornado Cash was blacklisted in 2022 by the Treasury’s Office of Foreign Assets Control (OFAC), which alleged that the protocol facilitated over $7 billion in illicit transactions.

Among these, U.S. authorities highlighted $455 million stolen by Lazarus, a North Korean state-backed hacking group. As part of the sanctions, Americans were barred from using Tornado Cash or transacting with related Ethereum addresses, with officials citing national security concerns.

Crypto Community Challenges Government Overreach

The OFAC sanction sparked immediate backlash from the crypto industry, particularly privacy advocates who viewed the sanctions as a direct attack on open-source technology.

Six Tornado Cash users, with support from Coinbase, sued the Treasury, arguing that the government had overstepped its authority by targeting software rather than the criminals misusing it.

The case brought questions to the forefront “How should decentralized finance (DeFi) be regulated? Do privacy-focused protocols deserve the same legal protections as traditional financial institutions? And does sanctioning open-source code violate constitutional rights?”

A breakthrough came in November 2023 when a federal appeals court ruled that OFAC had exceeded its authority. The court determined that Tornado Cash’s smart contracts could not be classified as “property of a foreign national or entity” under the International Emergency Economic Powers Act.

Despite the ruling, the Treasury took months to officially remove the sanctions, assessing its legal and policy stance before publicizing the reversal.

Tornado Cash’s Legal Battle Isn’t Over

While lifting the ban, U.S. officials reaffirmed their commitment to fighting illicit finance. They warned that crypto mixers used for money laundering or other criminal activities would still face scrutiny.

Treasury Secretary Scott Bessent emphasized the government’s focus on 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.”

Despite the sanctions being lifted, legal troubles persist for Tornado Cash’s developers. Co-founder Roman Storm remains under indictment, accused of facilitating over $1 billion in money laundering. 

Meanwhile, Alexey Pertsev, another key developer, was sentenced in the Netherlands last year.

The Tornado Cash case sets a precedent for future policies surrounding privacy tools in DeFi. 

While crypto advocates hail the decision as a victory for financial freedom, regulators remain cautious about balancing innovation with security.