US lifts sanctions on Tornado Cash cryptocurrency mixing service
Could the United States be shifting its stance on cryptocurrency, or is it a strategic move to assert dominance in the digital realm?
Recent developments suggest a potential evolution of the US government’s approach to the crypto landscape. Most notably, the US Treasury Department decided to remove sanctions placed on Tornado Cash, a controversial crypto mixer accused of laundering enormous sums of illicit virtual currency for various criminal elements and nation-states.
Back in 2022, the Biden administration had pointed fingers at Tornado Cash, claiming that it had been involved in laundering over $7 billion in cryptocurrency since 2019, including $455 million stolen by North Korea’s Lazarus Group. Subsequently, sanctions were imposed to restrict its utilization. Then, in 2023, legal actions were taken against two of Tornado Cash’s founders, alleging their involvement in enabling over $1 billion in illicit transactions.
However, a critical turning point came in November when a federal appeals court questioned the legality of the Treasury’s ban on Tornado Cash’s smart contracts, deeming them not the “property” of any foreign individuals. As a result, the sanctions were lifted. Despite this, the authorities still harbor concerns about the potential misuse of the platform.
The US Treasury Department reiterated its vigilance over state-sponsored hacking and money laundering campaigns, particularly those targeting digital assets for malicious activities. This statement underscores the ongoing commitment to thwarting cybercriminals from profiting through unconventional channels, emphasizing a need for caution among US entities when dealing with potential risks.
Cryptocurrency mixers, like Tornado Cash, operate by combining multiple users’ transactions to obscure the origins and endpoints of the funds, thereby promoting privacy but also facilitating illicit financial activities.
Launched in 2019 as an open-source Ethereum mixer, Tornado Cash aimed to enhance transaction privacy but fell prey to exploitation by criminals. One of its developers, Alexey Pertsev, faced legal consequences in 2024 and is now contesting his conviction. In a separate incident, Tornado Cash co-founders Roman Storm and Roman Semenov were indicted in 2023 for money laundering conspiracy and sanctions breaches, leading to Storm’s arrest and Semenov’s listing as a fugitive.
Beyond the specific case of Tornado Cash, the Treasury’s decision to lift sanctions aligns with a broader policy shift within the current administration regarding digital currency regulation. This shift was evidenced by the recent public roundtable held by the Securities and Exchange Commission’s Crypto Task Force to explore the applicability of existing securities laws to digital assets and to propose tailored regulatory frameworks for this evolving domain.
Additionally, recent developments, such as the resolution of a multi-year legal dispute between the SEC and Ripple Labs over the XRP token, further highlight this changing landscape of crypto regulation in the United States. The withdrawal of the SEC’s appeal in the Ripple case, coupled with its clarification on the regulatory scope of cryptocurrency mining activities, signals a reevaluation of the agency’s oversight approach.
Overall, these developments hint at a nuanced recalibration of the US government’s strategies in dealing with the complexities of the digital finance sector, underpinned by a blend of regulatory agility and strategic foresight.
