Treasury Removes Tornado Cash from Sanctions List After Court Ruling

The U.S. Treasury Department officially removed Tornado Cash from its sanctions list on March 21, 2025, reversing sanctions imposed in August 2022. The move came after a November 2024 federal appeals court ruling that found the Treasury had exceeded its authority. The cryptocurrency mixer had been accused of facilitating money laundering activities, with regulators claiming it helped process more than $7.6 billion worth of virtual assets since its creation in 2019.

The Office of Foreign Assets Control (OFAC) had placed Tornado Cash on its Specially Designated Nationals list, targeting over 100 Ethereum wallet addresses associated with the platform. The November 2024 court decision stated that OFAC “overstepped its congressionally defined authority.” The ruling centered on the fact that Tornado Cash’s immutable smart contracts cannot be considered “property” under the International Emergency Economic Powers Act.

Following the delisting, the Treasury Department argued the case should be considered resolved. They stated in court documents that because Tornado Cash had been removed from the sanctions list, the lawsuit was now “moot.” The Treasury further claimed the court should assess whether it still has jurisdiction, noting that federal courts have a “continuing obligation to satisfy itself” on matters of Article III jurisdiction.

However, Coinbase’s chief legal officer Paul Grewal strongly disagrees with this approach. In a March 24 post, he criticized the Treasury’s attempt to avoid a final court judgment. Grewal argues this is a textbook example of “voluntary cessation,” a legal principle that applies when a defendant ends a contested action to avoid a court ruling. For voluntary cessation to apply, there must be clear assurance that the behavior will not happen again. Grewal points out that the Treasury has provided no such guarantee.

He referenced a 2024 Supreme Court decision involving a U.S. citizen who had been removed from the No Fly List. In that case, the court found the matter was not moot because the government failed to assure the individual would not be placed back on the list. Grewal stated, “Treasury has likewise removed the Tornado Cash entities from the SDN, but has provided no assurance that it will not re-list Tornado Cash again. That’s not good enough, and will make this clear to the district court.”

Ask Aime: What will happen to Tornado Cash now it's off the sanctions list?

The legal challenges began in September 2022. Six Tornado Cash users, led by Ethereum core developer Preston Van Loon and supported by coinbase, sued the Treasury to reverse the sanctions. Crypto policy advocacy group Coin Center filed a similar lawsuit in October 2022. While a Texas federal court initially sided with the Treasury in August 2023, an appeals court later ruled that the sanctions against Tornado Cash’s immutable smart contracts were unlawful. The Treasury had 60 days to challenge this decision but ultimately lost. The U.S. court overturned the sanctions on January 21, requiring the government agency to remove them by March.

Despite the removal of sanctions, the developers behind Tornado Cash still face legal troubles. The U.S. charged co-founders Roman Storm and Roman Semenov in August 2023 with helping launder over $1 billion in cryptocurrency through the platform. Roman Semenov remains at large and appears on the FBI’s most wanted list. Roman Storm is currently free on a $2 million bond and expected to face trial in April. Meanwhile, Tornado Cash developer Alexey Pertsev has seen some relief in his legal situation. A Dutch court suspended his pretrial detention, allowing him to be released from prison under electronic monitoring while he focuses on appealing his conviction.

In the midst of these legal proceedings, Treasury Secretary Scott Bessent emphasized the department’s commitment to fighting illicit finance. “Digital assets present enormous opportunities for innovation and value creation for the American people,” Bessent said. The Treasury stated it remains dedicated to using its powers to combat malicious cyber actors, specifically mentioning targeting North Korea’s ability to fund weapons of mass destruction and ballistic missile programs through digital assets.

The ongoing dispute highlights the complex balance between regulating cryptocurrency services and respecting the decentralized nature of blockchain technology. As the legal process continues, both the crypto industry and regulators are watching closely for a final resolution.