On March 21, 2025, the U.S. Treasury Department announced the removal of sanctions on Tornado Cash, a cryptocurrency mixing service, reversing a 2022 ban by the Office of Foreign Assets Control (OFAC). This Tornado Cash sanctions lifted decision, following legal challenges, marks a potential turning point in U.S. crypto policy 2025, reflecting a nuanced approach to regulating blockchain privacy tools as the digital asset landscape evolves.
The Road to Delisting
Tornado Cash, launched in 2019, is a decentralized Ethereum-based protocol that enhances transaction privacy by pooling and mixing funds through smart contracts. In August 2022, OFAC blacklisted it, alleging it facilitated $7 billion in transactions, including $455 million tied to North Korea’s Lazarus Group, a state-sponsored hacking entity. The sanctions barred U.S. persons from using the service and froze over 100 Ethereum addresses, igniting debates over the regulation of open-source technology.
Legal challenges shifted the narrative. In November 2024, the U.S. Fifth Circuit Court of Appeals, in Van Loon v. Department of the Treasury, ruled that OFAC overstepped its authority under the International Emergency Economic Powers Act (IEEPA), as Tornado Cash’s immutable smart contracts did not qualify as “property.” A Texas district court affirmed this in January 2025, prompting the Treasury to delist Tornado Cash and its associated addresses on March 21, 2025, citing “novel legal and policy issues” in decentralized finance.
Treasury’s Evolving Stance
The Treasury framed the delisting as a strategic choice, not merely a legal concession. While lifting restrictions, it emphasized ongoing concerns about North Korean cyber threats, with Secretary Scott Bessent stating, “Digital assets offer innovation opportunities, but we must secure them from illicit actors.” This suggests a 2025 focus on targeted enforcement rather than blanket bans, balancing innovation with security in Treasury crypto regulation.
Impact on Privacy and Innovation
The decision has significant implications for the crypto ecosystem. Tornado Cash’s token, TORN, surged 75% within hours, per Etherscan data, reflecting market optimism. Privacy advocates argue that mixing services protect legitimate users—like activists under oppressive regimes—rather than just enabling crime. For startups, the lifted sanctions reduce risks of developing blockchain privacy tools, potentially spurring innovation. This aligns with other 2025 regulatory developments, such as the SEC’s March 21 proposal to exempt NFT fundraising from securities rules, indicating a broader pro-crypto shift in the U.S.
Lingering Challenges for Developers
Despite the protocol’s reprieve, its developers face ongoing legal battles. Roman Storm is set for a July 2025 trial on money laundering charges related to aiding the Lazarus Group, a case upheld in February 2025. Roman Semenov remains individually sanctioned, and Alexey Pertsev is serving a five-year sentence in the Netherlands. These cases underscore a persistent tension: while code may be free, its creators are not, raising questions about accountability in decentralized systems.
What’s Next for Crypto in 2025?
The sanctions lift revitalizes Tornado Cash, but its history with illicit activity remains a concern. Ethereum and privacy coins like Monero saw price increases post-announcement, signaling market confidence. This move fits into 2025’s broader trends, such as the IMF’s integration of crypto into global financial standards, suggesting growing mainstream acceptance. The Treasury may now prioritize transaction-level oversight over protocol bans, aiming to curb misuse while fostering innovation. For the crypto industry, 2025 could be a transformative year as the U.S. navigates the delicate balance between regulation and blockchain potential.