The U.S. Treasury Department has officially removed sanctions on Tornado Cash, a cryptocurrency mixing service, reversing a controversial ban set by the Office of Foreign Assets Control (OFAC) in 2022. Announced on March 21, 2025, this decision follows legal challenges and reflects a potential shift in U.S. policy toward 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, introduced in 2019, is a decentralized protocol on Ethereum that anonymizes transactions by pooling and mixing funds via smart contracts. On August 8, 2022, OFAC added it to the Specially Designated Nationals (SDN) list, alleging it facilitated $7 billion in transactions, including $455 million linked to North Korea’s Lazarus Group. The sanctions blocked U.S. persons from using it and froze over 100 Ethereum addresses, sparking debate over regulating open-source technology.
The tide turned with legal pushback. In November 2024, the U.S. Fifth Circuit Court of Appeals, in Van Loon v. Department of the Treasury, ruled that OFAC lacked authority to sanction Tornado Cash’s immutable smart contracts under the International Emergency Economic Powers Act (IEEPA). The court deemed them not “property” in a traditional sense. A Texas district court upheld this in January 2025, weakening the sanctions’ foundation. On March 21, 2025, the Treasury delisted Tornado Cash, citing “unique legal and policy challenges posed by decentralized financial tools.”
Treasury’s New Approach
The Treasury presented the delisting as a deliberate policy choice, not just a reaction to court rulings. It lifted restrictions on all associated Ethereum addresses but maintained a focus on North Korean cyber threats. “We are committed to countering illicit finance, especially from actors like the Lazarus Group,” the Treasury stated, suggesting future efforts might target specific misuse rather than entire protocols. Secretary Scott Bessent added, “Digital assets hold promise for innovation, but we must safeguard them from exploitation.” This indicates a balanced approach for 2025—supporting blockchain growth while addressing security.
Effects on Crypto Privacy and Innovation
The decision reverberates across the crypto space. Tornado Cash’s token, TORN, spiked 75% within hours, as tracked by Ethereum blockchain data from Etherscan. Privacy advocates view this as a victory, arguing that mixing services protect legitimate users—like activists needing anonymity—not just criminals. For crypto startups, the lifted sanctions reduce the risk of building privacy-focused tools, encouraging innovation.
This aligns with other 2025 regulatory shifts, such as SEC Commissioner Hester Peirce’s March 21 proposal to exempt NFT fundraising from securities rules. Together, these moves suggest a more permissive U.S. stance. However, startups must still comply with anti-money laundering (AML) laws, given the Treasury’s North Korea concerns.
Developer Challenges Persist
The protocol’s freedom doesn’t extend to its creators. Roman Storm faces a July 2025 trial on money laundering charges, upheld in February 2025 by Judge Katherine Polk Failla as tied to specific Lazarus Group aid. Roman Semenov remains sanctioned individually, and Alexey Pertsev serves a five-year sentence in the Netherlands. These cases highlight a lingering tension between code and accountability.
Looking Forward in 2025
The sanctions lift revives Tornado Cash, but its past ties to illicit activity cast a shadow. Ethereum and privacy coins like Monero rose post-announcement, reflecting market optimism. This fits broader 2025 trends, like the IMF’s crypto integration into financial systems. The Treasury may now focus on transaction-level oversight. For crypto privacy and innovation, 2025 could be transformative, with the U.S. balancing blockchain potential against regulatory needs.
