The US Department of Treasury did a complete 180 and lifted economic sanctions against Tornado Cash. On 21 March 2025, the Treasury announced its case against the cryptocurrency mixing company as moot. Authorities have previously accused Tornado Cash of facilitating money laundering activities, including activities that link back to the infamous North Korean Lazarus Group.
In their announcement, the Treasury stated, “Based on the Administration’s review of the novel legal and policy issues raised by the 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.”
However, Coinbase’s Chief Legal Officer, Paul Grewal, criticized the Treasury’s handling of the whole situation, calling it a voluntary cessation. He has argued that the Treasury’s attempt to dismiss the ongoing lawsuit, declaring it moot, is procedurally improper. Grewal noted that while the Treasury has removed Tornado Cash from the sanctions list, there is no guarantee that it won’t be added back.
BREAKING: People will once again be able to use Tornado Cash!
These contracts officially have to be removed from the US Gov sanction list.
People don’t understand what a HUGE win for crypto this is.
Make Crypto great again! pic.twitter.com/dwddOd9fkF
— KatieePCrypto.pls (@KatieePCrypto) November 26, 2024
Why Is Coinbase Criticizing The Dismissal?
For the uninitiated, a decentralized platform built on the Ethereum blockchain, Tornado Cash, removes the details of a crypto transaction’s origin and destination to maintain transaction privacy.
The functionality of the platform makes it ideal for those who want to transact anonymously. However, the same functionality has also attracted malicious actors and has caused the company major headaches.
Case in point: in 2022, the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned the company, alleging that the company has laundered over $7 billion since its inception in 2019. Moreover, the OFAC alleged that the laundered amount also included more than $455 million that was stolen by North Korea’s Lazarus Group.
The sanctions, however, faced immediate pushback from the crypto community. Coinbase, at that time, had backed six users of Tornado Cash to file a lawsuit challenging the sanctions placed on the company as they argued that sanctioning an open-sourced software exceeded the Treasury’s authority.
Tornado Cash realized vindication in November 2024 when a federal appeal court sided with them, stating that the Treasury had indeed overstepped its boundary.
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Tornado Cash Case Dismissal By the Treasury Called ‘Voluntary Cessation’
The Treasury, after the decision of the federal appeals court, undertook a comprehensive review of its legal policies, resulting in the removal of Tornado Cash from its sanctions list.
Despite the removal of the company’s name from the sanction list, the Treasury reiterated caution against North Korean cyber activities. Treasury Secretary Scott Bessant advised boosting security protocols for the digital industry to safeguard against abuse from state-sponsored hacking groups and other illicit actors.
Lifting the sanctions on Tornado Cash, however, elicited a mixed response. Privacy advocates celebrated this as a victory for open-source development and financial privacy, while critics expressed concern that malicious actors would exploit the platform now that the sanctions were lifted.
🌪🍿 #TORN Coinbase General Counsel: The US Treasury Department has filed another lawsuit against Tornado Cash, just after OFAC removed Tornado Cash addresses from the sanctions list, where it is challenging the jurisdiction of the case.
The Treasury removed Tornado Cash… pic.twitter.com/J5VYLTz6sl— Hadri Derar (@HadriDerar) March 23, 2025
As per Grewal, the Treasury has not addressed the core issue of the situation and a final judgment will be necessary to prevent similar overreach in the future.
Sidenote, Tornado Cash’s co-founder Roman Storm is yet to face trial in April. He is currently out on a $2 million bond for allegedly laundering over $1 billion in crypto through the platform.
Key Takeaways
- The U.S. Treasury lifted sanctions on Tornado Cash after legal challenges.
- Coinbase’s legal chief criticized the Treasury’s handling of the case.
- Grewal says that a final judgment will prevent similar overreach in the future.
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