The U.S. Treasury Department has announced the removal of sanctions against Tornado Cash, a cryptocurrency mixing service that was accused of aiding the North Korea-linked Lazarus Group in laundering their illicit proceeds.
According to the Treasury Department, the decision to remove sanctions was made after a thorough review of the novel legal and policy issues raised by the use of financial sanctions against financial and commercial activity within evolving technology and legal environments.
In a statement, the Treasury Department said, “We have exercised our discretion to remove the economic sanctions against Tornado Cash.”
In conjunction with this move, the Treasury Department is also removing over 100 Ethereum (ETH) wallet addresses from the Specially Designated Nationals (SDN) list.
The Office of Foreign Assets Control (OFAC) had added Tornado Cash to its sanctions list in August 2022, citing its alleged use in laundering over $7.6 billion worth of virtual assets since its creation in 2019.
However, a U.S. Fifth Circuit court ruling in November 2024 reversed this decision, stating that OFAC had “overstepped its congressionally defined authority” by sanctioning the cryptocurrency mixer.
The court’s decision was based on the view that OFAC’s ability to sanction entities does not extend to Tornado Cash, as its immutable smart contracts cannot be considered “property” under the International Emergency Economic Powers Act (IEEPA).
According to documents filed by the Treasury Department, the court reasoned that there is no person in control of immutable smart contracts and therefore “no party with which to contract.”
Despite removing sanctions against Tornado Cash, the Treasury Department remains committed to using its powers to combat and disrupt malicious cyber actors from exploiting the digital assets ecosystem.
The department will continue to work to restrict the ability of North Korea to fund its weapons of mass destruction and ballistic missile programs.
Secretary of the Treasury Scott Bessent emphasized the importance of securing the digital asset industry from abuse by North Korea and other illicit actors, stating that “digital assets present enormous opportunities for innovation and value creation for the American people.”
Bessent added, “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.”
sentenced Alexey Pertsev, one of the co-founders of Tornado Cash, to 5 years and 4 months in prison. Two of its other founders, Roman Storm and Roman Semenov, were indicted by the U.S. Department of Justice in August 2023.
