TLDR
- After a ruling in their favor last November, the US Treasury eliminated Tornado Cash from its sanctions list on March 21, 2025, citing an overreach of authority by OFAC.
- The Treasury argues there's no need for further court intervention since the issue has become irrelevant.
- Coinbase's Chief Legal Officer, Paul Grewal, insists that merely stopping the sanctions isn't enough; there should be guaranteed measures to prevent future occurrences.
- Back in August 2022, Tornado Cash faced sanctions over accusations of aiding in laundering over $7.6 billion in cryptocurrency.
- The co-founders, Roman Storm and Roman Semenov, are entangled in ongoing legal troubles, with Storm's trial set for April.
The US Treasury reversed its August 2022 sanctions on Tornado Cash by March 21, 2025, prompted by a late 2024 court decision that highlighted an overstep in their authoritative scope.
Tornado Cash found itself in hot water for allegedly being used to channel substantial sums of illicit digital currency since its launch in 2019.
Identified by the Office of Foreign Assets Control (OFAC), Tornado Cash had been added to the Specially Designated Nationals list alongside numerous Ethereum addresses connected to it.
The judgment made in November 2024 concluded that OFAC had breached its defined powers, particularly concerning Tornado Cash’s immutable smart contracts and how they’re classified under existing law.
Following the delisting, the Treasury Department They argued that following Tornado Cash’s delisting, the case should now be seen as resolved.
The Treasury also questioned whether the court's authority remains intact, underlining a judicial obligation to confirm jurisdictional legitimacy.
After the sanctions lift, a newfound legal confrontation is brewing.
However, Paul Grewal from Coinbase strongly contends this maneuver, venting his disapproval in a post and criticizing the Treasury's avoidance tactics.
\"Power doesn't quietly diminish; it clings on till its last breath,\" Grewal criticized. \"Despite reluctantly delisting Tornado Cash, they now deem the necessity for a court ruling null. But they’re only bending the rules to evade accountability.\"
Drawing on a Fifth Circuit conclusion, he explained how simply retracting an action doesn’t preclude court review, especially if the action could reoccur.
— paulgrewal.eth (@iampaulgrewal) March 23, 2025
Grewal contends this is a classic “voluntary cessation” case, urging that trust requires a firm commitment against repeating the behavior.
Citing a case involving the No Fly List, Grewal notes the necessity of future protection assurances for the removal to hold.
He emphasized the laxity of the Treasury, who have failed to guarantee that Tornado Cash will not be sanctioned again.
Legal troubles surrounding Tornado Cash sparked in September 2022 when users, supported by prominent figures like Preston Van Loon and backed by Coinbase, took a stand against the Treasury.
Coin Center, a crypto policy advocacy, pursued a parallel lawsuit, initially losing in a Texas court but later winning an appeal against the sanctions on Tornado Cash's unchangeable contracts.
The Treasury’s time to appeal ran out after losing the case, rendering the court to overturn the sanctions by early 2025.
Even with the sanctions removed, Tornado Cash's developers aren't out of hot water due to legal pursuits over alleged billion-dollar laundering activities.
Semenov remains elusive, noted on the FBI's wanted list, while Storm awaits trial out on bail.
In a positive twist, Tornado Cash developer Alexey Pertsev's pretrial custody was lifted by a Dutch court, letting him out under surveillance for his appeal.
With the legal tensions ongoing, US Treasury Secretary Scott Bessent has stated their intention to battle illicit finance, while advocating innovation in digital assets.
The Treasury reaffirmed commitments against cyber threats, detailing focus on disrupting North Korea's funding for military programs via digital currencies.
This ongoing saga underscores the delicate balance of regulating cryptocurrencies without stifling the inherent decentralized blockchain technology.
Maisie brings her seasoned expertise in crypto reporting, having contributed to numerous high-profile platforms and now leading the charge at Blockfresh.com.
