The U.S. Treasury Department has announced that it’s removing sanctions against Tornado Cash, a cryptocurrency mixer service that has been accused of aiding the North Korea-linked Lazarus Group to launder their ill-gotten proceeds.
“Based on the Administration’s review of the novel legal and policy issues raised by use of financial sanctions against financial and commercial activity occurring within evolving technology and legal environments, we have exercised our discretion to remove the economic sanctions against Tornado Cash,” the Treasury said in a statement.
In conjunction with the move, over 100 Ethereum (ETH) wallet addresses are also being removed from the Specially Designated Nationals (SDN) list.
The department’s Office of Foreign Assets Control (OFAC) added Tornado Cash to its sanctions list in August 2022. It was estimated to have been used to launder more than $7.6 billion worth of virtual assets since its creation in 2019, the Treasury said at the time.
However, a U.S. Fifth Circuit court issued a decision in November 2024, reversing a decision about the mixer, ruling that OFAC “overstepped its congressionally defined authority” when it sanctioned the cryptocurrency mixer.
This stemmed from the court’s view that OFAC’s ability to sanction entities does not extend to Tornado Cash because its immutable smart contracts cannot be deemed as “property” under the International Emergency Economic Powers Act (IEEPA).
“With respect to immutable smart contracts, the court reasoned, there is no person in control and therefore ‘no party with which to contract,'” according to documents filed by the Treasury Department as part of the case.
It further said it remains committed to using its powers to combat and disrupt malicious cyber actors from exploiting the digital assets ecosystem, and it will do everything in its capacity to restrict the ability of North Korea to fund its weapons of mass destruction and ballistic missile programs.
“Digital assets present enormous opportunities for innovation and value creation for the American people,” said Secretary of the Treasury Scott Bessent.
“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.”
Last May, a Dutch court on Tuesday 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.
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