The United States Treasury has officially lifted sanctions against Tornado Cash, an Ethereum-based coin mixing service. This decision follows a complex history involving legal challenges and concerns over money laundering.
Legal Challenges and Disputes
In November 2022, the U.S. Court of Appeals ruled that the Treasury overstepped its authority by sanctioning Tornado Cash. The court found that the platform operates as autonomous software and cannot be treated as property. Despite this ruling, the Treasury did not immediately lift the sanctions. The Justice Department requested a delay, pushing the final decision to March 2025. The crypto industry, especially Coinbase, strongly opposed the ban. Paul Grewal, Coinbase's Chief Legal Officer, spoke out about the delay and its impact on the industry.
Tornado Cash and Anti-Money Laundering Efforts
Even after lifting the sanctions, the Treasury Department remains concerned about the platform's potential use in illegal activities. Tornado Cash was initially sanctioned due to suspicions that it facilitated laundering of billions in crypto assets. Officials alleged that criminals, including North Korean hackers, used the platform to move stolen funds. However, the court ruling clarified that the Treasury cannot legally prohibit the software.
Ongoing Tornado Cash Controversies
Despite legal battles and government sanctions, Tornado Cash continued to operate. Ethereum co-founder Vitalik Buterin admitted using the service for private donations supporting Ukraine. Tornado Cash co-founder Roman Storm faces legal issues and was arrested on money laundering charges. Developer Alexey Pertsev was released with house arrest while preparing for an appeal.
The US Treasury's decision to remove sanctions on Tornado Cash signifies an important shift in the approach to regulating crypto technologies, highlighting the complexity of balancing innovation with security.
