The U.S. Treasury Department has officially lifted sanctions on Tornado Cash, a cryptocurrency mixing service, reversing the controversial ban imposed by the Office of Foreign Assets Control (OFAC) in 2022. This decision, announced on March 21, 2025, follows legal challenges and signals a possible shift in U.S. policy regarding blockchain privacy tools. As the crypto landscape evolves in 2025, here’s what this means for Tornado Cash and the broader digital asset ecosystem.
Background of the Sanctions
Tornado Cash, launched in 2019, is a decentralized protocol on Ethereum that helps anonymize transactions by mixing funds through smart contracts. On August 8, 2022, OFAC added it to the Specially Designated Nationals (SDN) list, claiming it enabled $7 billion in transactions, including $455 million tied to North Korea’s Lazarus Group. The sanctions blocked U.S. citizens from using the service and froze over 100 Ethereum addresses, sparking debates over how to regulate open-source technology.
The situation changed after legal challenges. In November 2024, the U.S. Fifth Circuit Court of Appeals ruled in Van Loon v. Department of the Treasury that OFAC did not have the authority to sanction Tornado Cash’s immutable smart contracts under the International Emergency Economic Powers Act (IEEPA). The court stated that smart contracts are not “property” in a traditional sense. A Texas district court reinforced this decision in January 2025, weakening the foundation of the sanctions. On March 21, 2025, the Treasury delisted Tornado Cash, citing the “unique legal and policy challenges” presented by decentralized financial tools.
Treasury’s New Approach
The Treasury framed the delisting as a conscious policy choice rather than just a response to court rulings. It lifted restrictions on all Ethereum addresses linked to Tornado Cash but emphasized its ongoing commitment to addressing North Korean cyber threats. The Treasury stated, “We are committed to countering illicit finance, especially from actors like the Lazarus Group,” signaling that future efforts may focus on specific instances of misuse rather than entire protocols. Secretary Scott Bessent also remarked, “Digital assets hold promise for innovation, but we must safeguard them from exploitation,” suggesting that 2025 will see a balanced approach that supports blockchain innovation while addressing security concerns.
Effects on Crypto Privacy and Innovation
This decision has had a major impact on the crypto space. Tornado Cash’s token, TORN, surged by 75% within hours, according to data from the Ethereum blockchain. Privacy advocates see this as a win, arguing that mixing services like Tornado Cash are vital for protecting legitimate users—such as activists who need anonymity—not just criminals. For crypto startups, the removal of sanctions reduces the risk of developing privacy-focused tools, encouraging further innovation.
This move also aligns with other recent regulatory changes in 2025. For example, SEC Commissioner Hester Peirce proposed on March 21 to exempt NFT fundraising from securities regulations. Together, these actions indicate a more open U.S. stance toward blockchain and crypto. However, startups will still need to comply with anti-money laundering (AML) laws, particularly given the Treasury’s ongoing concerns about North Korea’s activities.
Developer Challenges Persist
Despite the positive change for the protocol, the creators of Tornado Cash still face legal challenges. Roman Storm is set to stand trial in July 2025 on money laundering charges, which were upheld in February 2025 by Judge Katherine Polk Failla, who linked them to Tornado Cash’s support of the Lazarus Group. Roman Semenov remains individually sanctioned, and Alexey Pertsev is serving a five-year prison sentence in the Netherlands. These cases highlight the ongoing tension between the creators of decentralized protocols and legal accountability.
Looking Forward in 2025
The removal of sanctions revives Tornado Cash, though its past associations with illicit activities still cast a shadow. Following the announcement, Ethereum and privacy coins like Monero saw price increases, reflecting market optimism. This fits with broader trends in 2025, such as the IMF’s move to integrate crypto into global financial systems. Going forward, the Treasury may focus more on overseeing specific transactions rather than blocking entire protocols. In 2025, the U.S. could strike a new balance between fostering blockchain innovation and ensuring effective regulation.
