The US Treasury Department has removed cryptocurrency mixer Tornado Cash from its sanctions list, following a court ruling that deemed the sanctions unlawful.
A US appeals court ruled in January that the Treasury’s Office of Foreign Assets Control (OFAC) overstepped its authority by sanctioning Tornado Cash’s smart contracts. The court found that these contracts, which enable privacy in blockchain transactions, are not the property of any foreign national or entity.
“Tornado Cash’s immutable smart contracts are not the ‘property’ of a foreign national or entity, meaning […] OFAC overstepped its congressionally defined authority,” the ruling stated.
On March 21, the Treasury confirmed that OFAC had removed several Tornado-affiliated Ethereum smart contract addresses from its sanctions list.
Market Reaction
Tornado Cash’s native token, TORN, surged around 60% on the news, according to CoinMarketCap. As of March 21, TORN had a market capitalization of approximately $73 million and a fully diluted value of nearly $140 million.
Background and Money Laundering Allegations
OFAC originally sanctioned Tornado Cash in August 2022, alleging that the platform facilitated money laundering for Lazarus Group, a North Korean hacking collective. The US Treasury claims Tornado Cash has been used to launder over $7 billion in illicit funds since its launch in 2019.
Lazarus Group has allegedly stolen billions in crypto through cyberattacks, including a reported $1.4 billion theft from the Bybit exchange in February 2024—the largest crypto exploit to date.
In 2024, a Dutch court convicted Tornado Cash developer Alexey Pertsev of money laundering, sentencing him to 64 months in prison. Pertsev is currently under house arrest as he prepares an appeal.
Industry Response
The Ethereum Foundation has pledged $1.25 million for Pertsev’s legal defense. “Privacy is normal, and writing code is not a crime,” the foundation stated in a Feb. 26 post on X.
The removal of Tornado Cash from the sanctions list marks a significant shift in the regulatory landscape for crypto privacy tools.
