US Court Blocks Treasury’s Sanctions on Tornado Cash
Landmark Ruling: Treasury’s Sanctions Overruled
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A recent decision by a US Federal court has marked a significant victory for the crypto privacy community. The Department of the Treasury has been prohibited from reinstating sanctions against Tornado Cash, a cryptocurrency mixing service. This follows attempts by the Treasury to declare the case moot after the protocol was removed from the Office of Foreign Assets Control’s Specially Designated Nationals list.
Judicial Decision Supports Crypto Privacy
Judge Robert Pitman of the US District Court for the Western District of Texas delivered a crucial verdict, declaring the Treasury’s actions against Tornado Cash as unlawful. The court has permanently enjoined the Treasury from reimposing these sanctions. The initial sanctions were imposed in August 2022, with allegations that Tornado Cash had enabled over $7 billion in money laundering activities, including $455 million by North Korea’s Lazarus Group.
Reversal of Sanctions: A Turning Point
In a pivotal decision in January 2025, the court overturned the OFAC’s sanctions following a prior ruling that found the Treasury exceeded its authority. Despite Tornado Cash and associated Ethereum addresses being delisted, the Treasury faced criticism for suggesting the case was moot. Paul Grewal, Chief Legal Officer at Coinbase, voiced concerns about the lack of assurance that the crypto mixer would not be relisted.
Implications of the Court’s Decision
The court pointed out that the case retains relevance as the issues could recur without review. The Treasury’s attempts to moot the case by altering facts were rejected. This decision reflects the ongoing tension between regulatory efforts and crypto privacy rights. The ruling clearly states that the Treasury’s designation is unlawful, setting a precedent for the future of crypto regulation.
Ongoing Battle for Crypto Privacy
The Tornado Cash case highlights the complex dynamics of security and economic regulation. The Treasury maintains that future regulations on similar technologies should not be restricted. However, the court focused on adhering to the Fifth Circuit’s instructions, granting partial summary judgment in favor of the plaintiffs.
Future Challenges for Crypto Developers
The struggle for crypto privacy and open-source development continues. Tornado Cash co-founder Roman Storm and developer Alexey Pertsev are preparing their legal defenses. Pertsev, facing a lengthy sentence in the Netherlands, plans to appeal, while Storm awaits trial. The DeFi Education Fund has urged the White House to reconsider efforts against open-source developers, warning of potential setbacks for technological innovation.
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