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The U.S. Treasury has officially lifted economic sanctions against Tornado Cash, a cryptocurrency mixing service that obscures transaction details, after initially accusing the firm of facilitating the laundering of more than $7 billion for North Korean and other cybercriminal groups.
The Treasury Department’s Office of Foreign Assets Control (OFAC) had blacklisted Tornado Cash in 2022, alleging that the service played a critical role in laundering proceeds from cybercrimes. Among the most notable cases was the laundering of more than $455 million stolen by Lazarus, a North Korean government-sponsored hacking group.
A legal challenge against the sanctions was mounted by six users of Tornado Cash, who were financially backed by Coinbase, one of the largest cryptocurrency exchanges. The lawsuit sought to overturn the Treasury’s actions, arguing that OFAC had exceeded its authority. In November, a U.S. appeals court ruled that OFAC had indeed overstepped its legal boundaries, but despite the ruling, the sanctions remained in effect until now.
Following a review of legal and policy concerns surrounding the application of sanctions to emerging financial technologies, the Treasury decided to repeal them. In a statement, the department emphasized that the decision was made in light of the “evolving technology and legal environments” that impact regulatory enforcement.
Nevertheless, Treasury officials continue to voice concerns about North Korea’s illicit financial activities, particularly the use of cryptocurrency theft and money laundering to fund government operations. “Securing the digital asset industry from abuse by North Korea and other illicit actors is essential to establishing U.S. leadership and ensuring that the American people can benefit from financial innovation and inclusion,” said Treasury Secretary Scott Bessent.
Meanwhile, former President Donald Trump has been pushing for sweeping changes to U.S. cryptocurrency policies. Earlier this month, he signed an executive order aimed at creating a strategic reserve of cryptocurrencies and hosted a White House summit for industry leaders to discuss the future of digital assets.
Despite the Treasury’s decision to lift sanctions, legal battles related to Tornado Cash continue. Two of the firm’s co-founders were charged in 2023 with facilitating more than $1 billion in illicit transactions, including funds tied to the Lazarus Group. One of them, Roman Storm, is currently awaiting trial and has denied any involvement in criminal activity.
Additionally, one of Tornado Cash’s developers, Alexey Pertsev, was convicted of money laundering in the Netherlands last year. In May, he was sentenced to five years and four months in prison for his role in enabling illicit financial transactions through the platform.
With the lifting of sanctions, the debate over cryptocurrency regulation and the balance between financial innovation and national security is expected to intensify in the U.S., as policymakers and industry leaders navigate the implications of decentralized financial systems.
By fLEXI tEAM