The US government has officially stepped back from its controversial sanctions against Tornado Cash. Furthermore, the Treasury Department chose not to appeal a federal court ruling that challenged its authority over cryptocurrency mixers.
Legal Victory Forces Government’s Hand
The Treasury’s Office of Foreign Assets Control (OFAC) removed Tornado Cash from its sanctions list in March 2025. This decision came after the Fifth Circuit Court of Appeals ruled that the government exceeded its legal authority. The court determined that immutable smart contracts cannot be considered “property” subject to sanctions.Previously, OFAC had sanctioned Tornado Cash in 2022 for allegedly helping North Korean hackers launder over $455 million. However, the appeals court found that these smart contracts operate independently. Therefore, no person or entity can control or own them once deployed.The ruling sparked immediate market reactions. The TORN token surged over 900% following the announcement. Additionally, more than 100 Ethereum addresses were removed from the government’s sanctions list.
Criminal Cases Continue Despite Sanctions Relief
While the sanctions have been lifted, criminal prosecutions remain active. Roman Storm, one of Tornado Cash’s developers, still faces trial in July 2025. Moreover, authorities continue pursuing charges against Roman Semenov, who remains at large.The government maintains its commitment to fighting cryptocurrency-based money laundering. Treasury officials emphasized their dedication to targeting malicious actors who exploit digital assets. Nevertheless, this case highlights the challenges regulators face with decentralized technologies.
Privacy Tools Gain Legal Protection
The court’s decision represents a significant victory for privacy advocates. Legal experts believe this ruling will make it harder for authorities to sanction open-source protocols. Consequently, developers may feel more confident creating privacy-focused tools.This case demonstrates the ongoing tension between regulatory oversight and technological innovation. While the government lost this battle, the broader war over cryptocurrency regulation continues.
