In a landmark move, the U.S. Treasury Department has officially removed Tornado Cash from its sanctions list, citing a federal appeals court ruling that deemed its smart contracts not subject to traditional sanctions law. This decision marks a reversal of multiple previous sanctions imposed over allegations that the crypto mixing protocol had facilitated money laundering for North Korea’s Lazarus Group.
Tornado Cash, an Ethereum-based mixer, had been blacklisted by the Treasury’s Office of Foreign Assets Control (OFAC), which accused the platform of helping funnel billions in stolen crypto assets. The blacklist designation prevented U.S. individuals and businesses from transacting with Tornado Cash. However, a November 2024 ruling from the U.S. Fifth Circuit Court of Appeals concluded that the platform’s smart contracts were not “property” owned by a foreign national—undermining the basis for the sanctions.
Over 100 Ethereum Addresses Removed from Blacklist
Alongside the Tornado Cash decision, OFAC also removed over 100 Ethereum addresses linked to the platform from the Specially Designated Nationals (SDN) list. This action could signal a shift in how decentralized protocols are viewed by U.S. authorities, especially when there is no direct control by a sanctioned party.
Despite the lifted sanctions, the Treasury emphasized ongoing concerns over state-sponsored crypto abuse, particularly by North Korea. “We remain deeply concerned about the significant state-sponsored hacking and money laundering campaign aimed at deploying digital assets for the DPRK,” a Treasury spokesperson said.
Legal Troubles Continue for Tornado Cash Co-Founder
While Tornado Cash as a platform may be clear of U.S. sanctions, its co-founder Roman Storm is still on trial. Set to face a criminal court in July, Storm is accused of conspiring to violate sanctions imposed on the Lazarus Group. His legal team had previously filed a motion to dismiss charges, citing the same appeals court ruling that led to Tornado Cash’s delisting, but the motion was denied in February.
Storm’s attorney, Brian Klein, welcomed the removal of the sanctions but called on prosecutors to drop the criminal case as well. “Now the SDNY prosecutors should similarly reconsider their unfortunate decision to charge our client,” Klein said.
Regulatory Impact and Market Reaction
The Treasury has warned that fully vacating the Tornado Cash designation could have “disruptive consequences” for national security and enforcement. Still, the move is being seen as a win for decentralized finance advocates who argue that smart contracts cannot be sanctioned like traditional entities.
The market responded swiftly. The TORN token surged over 40% in the minutes following the Treasury’s announcement. Though legal clarity remains elusive, this latest development may reshape how regulators approach decentralized tools in future enforcement actions.