US Treasury Lifts Sanctions Against Ethereum Mixer Tornado Cash

The United States Treasury announced Friday that it has delisted Ethereum coin mixing service Tornado Cash from its list of parties sanctioned by the Office of Foreign Assets Control, or OFAC, reversing course after first blacklisting the service in 2022.

"Based on the Administration’s review of the novel legal and policy issues raised by use of financial sanctions against financial and commercial activity occurring within evolving technology and legal environments, we have exercised our discretion to remove the economic sanctions against Tornado Cash as reflected in Treasury’s Monday filing in Van Loon v. Department of the Treasury," the Treasury said Friday.

But the Treasury Department is actually tardy in its sanctions reversal.

Fifth Circuit Rules OFAC Overstepped in Sanctioning Tornado Cash's Immutable Smart Contracts

The U.S. Fifth Circuit Court ruled Tuesday that the Treasury overstepped by sanctioning Tornado Cash’s immutable smart contracts, stating the autonomous software cannot be classified as property. The Fifth Circuit held that when smart contracts are immutable—meaning no entity can modify or control them—they cannot be classified as "property" subject to sanctions under existing law. The decision reverses a lower court ruling and marks a significant win for privacy advocates and blockchain develop...

In November, a fifth circuit judge ruled that the Treasury Dept. had overstepped its authority by targeting Tornado Cash’s smart contracts. The judge wrote that autonomous software cannot be classified as property and therefore cannot be sanctioned.

After the judge’s ruling, Department of Justice prosecutors asked that the Treasury be granted a 60-day delay. That pushed OFAC’s deadline to March 17.

Coinbase backed the lawsuit, arguing that the sanctioning of Tornado Cash was unjust. And Paul Grewal, the crypto exchange’s chief legal officer, has had a lot to say about the delays.

There’s also a pending money laundering trial against Tornado Cash co-founder Roman Storm, who was arrested in 2023. In November, after the ruling that the Tornado Cash sanctions were an overreach, a U.S. district court judge struck down Storm’s motion to have his case dismissed.

The Treasury Dept. initially sanctioned Tornado Cash in August 2022, saying in a statement at the time that it had been used “to launder more than $7 billion worth of virtual currency since its creation in 2019.”

In Friday’s statement, the Treasury said that it continues to be concerned about money laundering, particularly from North Korea—whose malicious hacking groups have stolen billions from various crypto protocols and companies. But the department is trying to balance maintaining vigilance without stamping out innovation in the process.

Tornado Cash Dev Alexey Pertsev Gets $1 Million Donation From Ethereum Foundation

The EthereumEthereum Foundation has said it will donate $1.25 million to help Tornado Cash main developer Alexey Pertsev's legal defense. In a Wednesday post on X, formerly known as Twitter, the non-profit said that writing code was "not a crime," and posted a link for those wanting to add donations. Pertsev is one of the main developers behind the Tornado Cash app, a coin mixer the U.S. Treasury Department sanctioned in 2022 because they said criminals were using it to launder cash. The EF is...

“Digital assets present enormous opportunities for innovation and value creation for the American people,” said Secretary of the Treasury Scott Bessent, in a statement. “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.”

It’s worth noting that despite the U.S. sanctions and lawsuits, Tornado Cash was never actually disabled—much to the chagrin of lawamkers. In fact, Ethereum co-founder Vitalik Buterin very publicly declared that he had used it to privately make donations to support Ukraine in its war with Russia.

Editor's note: This story was updated after publication with additional detail.

Edited by Andrew Hayward