The U.S. Department of the Treasury has removed sanctions against Tornado Cash, a decentralized crypto mixer, thus permitting its use by American citizens.
This action overturns the sanctions enacted in August 2022 by the Office of Foreign Assets Control, which had accused the platform of enabling money laundering, including transactions associated with North Korea’s Lazarus Group.
Established in 2019, Tornado Cash is an Ethereum-based protocol designed to enhance transaction privacy, allowing users to obscure the origins and destinations of their cryptocurrency transfers.
While this service appeals to those seeking financial confidentiality, it has also been misused by malicious actors for laundering illicit funds.
The Treasury Department claimed that Tornado Cash was involved in laundering more than $7 billion in digital currency, with $455 million traced back to the Lazarus Group.
Treasury Secretary Scott Bessent remarked on this decision, saying, “Digital assets present significant opportunities for innovation and value creation for the American populace. Protecting the digital asset sector from exploitation by North Korea and other illicit entities is crucial for establishing U.S. leadership and ensuring that the American public can reap the benefits of financial innovation and inclusion.”
Concerns over free speech
Critics have contended that sanctioning open-source software violated free speech rights and stifled technological progress. In response, a group of Tornado Cash users, aided by the cryptocurrency exchange Coinbase, initiated a lawsuit to contest the sanctions.
In November 2024, a federal appeals court sided with the plaintiffs, asserting that the Treasury had exceeded its jurisdiction. The court noted that Tornado Cash’s immutable smart contracts did not qualify as “property” under federal law, thus evading the purview of the International Emergency Economic Powers Act.
Judge Don Willett remarked that while the technology could be misapplied, it was the responsibility of Congress, rather than the judiciary, to revise applicable laws.