The US Treasury's OFAC has recently delisted Tornado Cash from its SDN list, but one of its founders, Roman Semenov, remains sanctioned following a court ruling that OFAC exceeded its authority.
The Sanctioning of Tornado Cash
Tornado Cash, a well-known crypto mixing service, was blacklisted by OFAC in August 2022. The US Treasury accused the service of aiding criminals in laundering stolen assets. Authorities claimed that groups like the Lazarus Group used Tornado Cash to launder over $7 billion in cryptocurrency.
The Appeals Court Decision
On November 26, 2024, the Fifth Circuit Court of Appeals ruled in favor of the plaintiffs, stating that OFAC had overstepped its authority. The court ruled that Tornado Cash's smart contracts, as immutable lines of code, do not qualify as 'property' under the International Emergency Economic Powers Act (IEEPA) and therefore cannot be blocked by OFAC. Following this ruling, the Treasury Department announced plans to remove Tornado Cash from the SDN List, finalized by March 21, 2025.
Future Prospects for Tornado Cash
Despite Tornado Cash's removal from the sanctions list, one of its founders, Roman Semenov, remains under sanctions. His designation was modified, and he is now only sanctioned in relation to North Korea.
The delisting of Tornado Cash marks a significant development for the crypto community, though Roman Semenov's situation remains unresolved. This highlights the importance of regulatory clarity and the balance between security and innovation in the crypto space.
