Tornado Cash, a cryptocurrency mixer accused of allegedly facilitating the laundering of stolen funds by North Korean state hackers, has been removed from the US sanctions list.
This decision follows a November appellate court ruling that determined the US Treasury Department had exceeded its authority in imposing sanctions on the platform.
Tornado Cash Sanctions Lifted
Tornado Cash had been on the Specially Designated National and Blocked Persons (SDN) list since 2022, accused of laundering more than $455 million in cryptocurrency stolen by hackers associated with North Korea.
The Treasury’s sanctions were part of broader efforts to combat state-sponsored hacking and cybercrime, particularly in relation to the Democratic People’s Republic of Korea (DPRK). However, a federal appeals court found in November that the Treasury’s actions violated legal boundaries.
The court ruled that the smart contracts that underpin Tornado Cash—essentially immutable lines of code on the blockchain—do not qualify as property under the International Emergency Economic Powers Act (IEEPA), the law typically used to freeze assets for national security reasons.
Following the court’s decision, the Treasury Department announced on Friday that it would drop the sanctions against Tornado Cash. In its statement, the department acknowledged the appellate court’s ruling while framing its decision as a necessary review of the legal and policy challenges posed by financial sanctions in the digital age.
Treasury Secretary Scott Bessent emphasized the importance of securing the digital asset industry from abuse while also recognizing the innovation potential of these technologies. Bessent stated:
We remain deeply concerned about the significant state-sponsored hacking and money laundering campaign aimed at stealing, acquiring, and deploying digital assets for the DPRK and the Kim regime.
‘Historic Win For Crypto’
The decision has been met with mixed reactions. Coinbase, a major cryptocurrency exchange financially backing the legal challenge, celebrated the ruling as a “historic win for crypto.”
A Coinbase representative argued that blocking open-source technology due to the actions of a few bad actors is not what Congress intended when it authorized financial regulations.
Despite the lifting of sanctions, Tornado Cash’s operations have continued even under scrutiny. Research indicates that North Korean hackers still utilize the platform to launder significant amounts of stolen cryptocurrency.
The Treasury previously accused Tornado Cash of laundering over $7 billion since its inception in 2019, emphasizing the ongoing challenges in regulating decentralized financial systems.
Legal actions are still in motion against Tornado Cash’s co-founders. Roman Storm was arrested in Washington state in 2023, while his co-founder, Roman Semenov, remains at large and on the US sanctions list.
Additionally, a Dutch court recently sentenced a Tornado Cash developer, Alexey Pertsev, to over five years in prison for his involvement in money laundering activities.
Featured image from DALL-E, chart from TradingView.com
