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In line with a court order issued last November, the US Treasury has removed its sanctions on Tornado Cash, a virtual currency mixer it once described as "notorious".
On Friday (March 21), the Treasury announced that it has removed Tornado Cash from its Specially Designated Nationals (SDN) and Blocked Persons list.
The move means that Tornado Cash’s deposit address, as well as the smart contracts that power the platform, can now be accessed legally by US persons.
Created in 2019, Tornado Cash is an open-source, decentralised protocol that allows users to make anonymous crypto-asset transfers.
By sending payments via Tornado Cash, users can obfuscate both the origin and destination of their transactions, making them untraceable, even by Tornado Cash itself.
In 2022, when the Treasury originally sanctioned Tornado Cash, it did so on the belief that it had been used to launder more than $7bn in illicit funds since its creation.
This included more than $455m of stolen crypto-assets linked to the Lazarus Group, North Korea’s state-sponsored crypto hackers.
In its statement on the removal of the sanctions, the Treasury said it remains “deeply concerned” by the use of Tornado Cash by North Korean state actors, and will continue to monitor the platform for transactions that may benefit the Kim regime.
However, the agency also stressed its support for the legal use of digital assets, and its plans to nurture their future potential.
“Digital assets present enormous opportunities for innovation and value creation for the American people,” said Treasury Secretary Scott Bessent.
“Securing the digital asset industry from abuse by North Korea and other illicit actors is essential to establishing US leadership and ensuring that the American people can benefit from financial innovation and inclusion.”
Battle won, but war not over
Roman Storm, co-founder of Tornado Cash, said the removal of the sanctions marks a “huge victory” for privacy, open-source technology and immutable, permissionless smart contracts.
However, he also warned that Tornado Cash will not be fully vindicated until the US government agrees to end its prosecution of him and Roman Semenov, a Russian national and fellow indicted co-founder, who remains at large.
“Although Treasury's decision sets a crucial precedent, the Southern District of New York (SDNY) prosecutors still haven't dropped their case against me,” he said.
“So while we have won a big battle, the war is far from over.”
Storm’s trial is set to begin in Manhattan on July 14, 2025, and could lead to a lengthy custodial sentence for the 35-year-old developer.
He faces charges of conspiracy to commit money laundering and conspiracy to commit sanctions violations, each of which carries a maximum prison sentence of 20 years.
He also faces one charge of conspiracy to operate an unlicensed money services business (MSB), which carries a maximum sentence of five years.
The removal of the sanctions on Tornado Cash does not mean that Storm will be found not guilty of these offences.
Rather, it simply means that the Treasury has carried out the instructions of an appeals court, which ruled last year that Tornado Cash cannot be sanctioned because it is “not capable of being owned”.
As covered by Vixio, a group of plaintiffs that were supported by Coinbase sued the Treasury on Tornado Cash’s behalf arguing that its open-source, self-executing software is not sanctionable under US law.
They argued that the statute in question, the International Emergency Economic Powers Act (IEEPA), only authorises the US government to freeze the assets of and prohibit transactions with foreign actors deemed to be a threat to US national security.
They further argued that Tornado Cash’s smart contracts cannot be sanctioned under the IEEPA because they are not the “property” of a foreign national or entity.
Rather, the smart contracts that run the platform have been fully immutable since 2021, meaning that they cannot be switched off, even by their own creators.
The court agreed that the Treasury had overstepped its authority in sanctioning Tornado Cash.
Paul Grewal, chief legal officer at Coinbase, welcomed the removal of the sanctions against Tornado Cash, but he also called on the Treasury to pledge that it will not impose sanctions on the platform, or similar platforms, in future.
“Treasury has removed the Tornado Cash entities from the SDN, but has provided no assurance that it will not re-list Tornado Cash again,” he said.
“That's not good enough.”
Tornado Cash co-founder Semenov remains sanctioned in a personal capacity.
Is it a crime to create a tool that is used for money laundering?
Storm does not dispute that he is one of the creators of Tornado Cash, but he does not believe that he has committed any crime.
In January, in a post on X, he described the charges against him as an attempt to “criminalise” the exercise of privacy in financial transactions.
“I am being prosecuted for writing open-source code that enables private crypto transactions in a completely non-custodial manner,” he said.
“The charges against me threaten to criminalise software development itself. If successful, the implications could extend far beyond the crypto industry, impacting every software developer.”
In addition to Coinbase, Storm and Tornado Cash are supported by a number of influential crypto firms and associations, including Coin Center, the Blockchain Association and the DeFi Education Fund.
Privacy campaigners such as Edward Snowden have also spoken out on their behalf.
