US Treasury Removes Tornado Cash From Sanctions As TORN Rallies

The US Treasury Department has officially removed the Ethereum mixing service Tornado Cash from the sanctions list maintained by the Office of Foreign Assets Control (OFAC). 

The update reverses the department’s original decision to blacklist the service in 2022. Following the announcement, the price of the TORN token surged by 70% within minutes.

The move comes after a federal court ruling last November challenged the legality of the initial sanctions. A judge from the Fifth Circuit Court concluded that Treasury overreached by targeting Tornado Cash’s autonomous smart contracts.

The court determined that the decentralized code could not be treated as property and therefore did not fall within the agency’s authority to sanction.

The Department of Justice had requested a 60-day extension following the ruling, setting a revised deadline of 17 March for the Treasury to comply.

Coinbase supported the legal case that led to the ruling. The exchange’s Chief Legal Officer, Paul Grewal, publicly criticized the Treasury’s delay in responding to the court decision.

Meanwhile, Roman Storm, a co-founder of Tornado Cash, is set to face trial in July on criminal charges related to his involvement in developing the privacy protocols. A second developer has also been charged but remains at large.

Why did the US sanction Tornado Cash

The US Treasury sanctioned Tornado Cash in August 2022 because it was allegedly used to launder billions of dollars worth of cryptocurrency, including funds linked to state-sponsored cybercriminals.

According to the Treasury, Tornado Cash helped obscure the origins of more than $7billion in virtual currency since its creation in 2019. A significant portion of that was tied to criminal activity.

Most notably, North Korea’s Lazarus Group reportedly used Tornado Cash to launder over $455m stolen in the Axie Infinity (Ronin Bridge) hack — the largest crypto theft on record at the time.

The Treasury argued that Tornado Cash failed to implement adequate controls to prevent illicit use, making it a tool for money laundering. Because of this, it was added to OFAC’s Specially Designated Nationals (SDN) list, effectively banning US individuals and entities from interacting with the platform.

The sanction marked the first time the US targeted open-source code rather than a person or organization, which later raised major legal and constitutional questions — particularly around code as speech and the nature of decentralized protocols