Treasury Lifts Sanctions on Tornado Cash
Ruling declares smart contracts aren't sanctionable "property" in major crypto legal breakthrough
After nearly three years of legal battles, the US Treasury has lifted its controversial sanctions on privacy protocol Tornado Cash, delivering a victory for crypto advocates who argued code itself cannot be criminalised.
The Treasury Department officially removed Tornado Cash from its Specially Designated Nationals list on March 21, 2025, reversing a 2022 decision that had effectively made it illegal for Americans to interact with the protocol's smart contracts.
The Treasury's hand was forced by a November 2024 federal appeals court ruling that concluded OFAC had overstepped its legal authority by treating immutable code as sanctionable "property" of a foreign national.
Read: Code No Criminal 🌪️
This means US citizens can once again legally deposit and withdraw funds through Tornado Cash without fear of violating sanctions laws — a development that sent the protocol's governance token soaring more than 50% to $12.45 within hours of the announcement.
A Landmark for Code Freedom
This has a larger impact beyond one privacy protocol. It's potentially a paradigm-shifting precedent for how code is treated under US law.
"We won," declared Neeraj Agrawal of crypto think tank Coin Centre in a celebratory X post that captured the sentiment of privacy advocates who've fought this battle since August 2022.
The ruling establishes that:
Software code itself cannot be sanctioned under the International Emergency Economic Powers Act
Smart contracts are legally distinct from their developers
Privacy tools have legitimate uses alongside potential illicit applications
North Korean Shadows Still Linger
"Digital assets present enormous opportunities for innovation and value creation for the American people. Securing the digital asset industry from abuse by North Korea and other illicit actors is essential." said Treasury Secretary Scott Bessent's in a statement.
The reference to North Korea isn't coincidental.
Treasury originally sanctioned Tornado Cash after claiming it had facilitated the laundering of over $7 billion in virtual currency, including funds stolen by the North Korean Lazarus Group.
Critics of the Treasury's reversal were quick to respond.
"In a long list of horribles, this is one of the most dangerous and irresponsible things coming out of the Trump White House. Tornado Cash exists to make it easier to launder money. Period." said Rep. Sean Casten (D-Illinois).
Legal Battles Continue
Despite the protocol's delisting, co-founder Roman Storm still faces a criminal trial next month for alleged sanctions violations and money laundering. His fellow founder, Roman Semenov, remains personally sanctioned.
"While we have won a big battle, the war is far from over," Storm noted on X, highlighting the ongoing legal jeopardy faced by the protocol's creators.
What This Means for Crypto Privacy
The ruling represents a rare win for privacy advocates in the ongoing tension between financial innovation and regulatory oversight.
More than 100 Ethereum addresses have been removed from the sanctions list, restoring access to users whose funds had effectively been frozen since 2022.
For the broader crypto ecosystem, this establishes a critical precedent: the government's power to regulate cryptocurrency has meaningful limits, particularly when it comes to open-source, immutable code.
Will this embolden privacy-focused development, or simply lead regulators to find more targeted enforcement mechanisms? The Treasury's cautious tone suggests this isn't surrender, merely a strategic repositioning in the ongoing battle over financial privacy.