U.S. Treasury: No Final Ruling Needed After Tornado Cash Removed from Sanctions List

U.S. Treasury: No Final Ruling Needed After Tornado Cash Removed from Sanctions List

  • 24.03.2025 10:13
  • cryptonews.com
  • Keywords: Tornado Cash

The U.S. Treasury removed Tornado Cash from its sanctions list, deeming the matter moot. However, Coinbase’s legal team argued the case remains unresolved without assurances against relisting. Meanwhile, Tornado Cash developers face ongoing legal challenges in the U.S., while one developer has moved the protocol to MegaETH's testnet.

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Context

Analysis and Summary: U.S. Treasury Delists Tornado Cash and Smart Contracts from Sanctions List

Overview

  • Date of Delisting: March 21, 2025
  • Entities Removed: Tornado Cash protocol and associated smart contract addresses from the Specially Designated Nationals (SDN) list

Key Facts and Data Points

  • Blacklisting in August 2022: Tornado Cash was added to OFAC’s sanctions list, accused of aiding North Korea’s Lazarus Group in cryptocurrency laundering.
  • Legal Battle: Six users, including Ethereum developer Preston Van Loon (supported by Coinbase), sued the Treasury over the legality of the sanctions.
  • Court Ruling: A Texas judge initially supported the Treasury in 2023, but an appeals court overturned the decision in January 2025, deeming the sanctions on immutable smart contracts unlawful.

Business Insights and Market Implications

1. Regulatory and Legal Dynamics

  • Treasury’s Position: The U.S. Treasury argued that delisting Tornado Cash renders the legal case moot but faced pushback from Coinbase’s Chief Legal Officer, Paul Grewal.
  • Voluntary Cessation Doctrine: Grewal referenced a 2024 Supreme Court ruling (Yonas Fikre case) to argue that the absence of assurance against relisting keeps the case alive.
  • Potential Future Risks: The lack of legal clarity could deter businesses from fully engaging with Tornado Cash, fearing potential relisting.

2. Impact on Founders and Legal Troubles

  • Founder Roman Storm: Charged with laundering over $1 billion, trial set for April 2025.
  • Co-founder Roman Semenov: Still at large, raising questions about accountability.
  • Developer Alexey Pertsev: Released in the Netherlands while appealing conviction.

3. Market and Competitive Dynamics

  • Tornado Cash’s Resilience: Despite sanctions, Tornado Cash maintained operational continuity, highlighting its decentralized nature.
  • Competitive Edge: The delisting may encourage other privacy-focused protocols to adopt similar strategies, intensifying competition in the cryptocurrency space.

4. Strategic Shifts

  • Move to MegaETH Testnet: A developer ported Tornado Cash to the MegaETH blockchain’s testnet, leveraging its high throughput (up to 20,000 transactions per second).
  • Potential for Scalability: This move could position Tornado Cash as a leader in privacy-preserving, high-performance transactions.

Long-Term Effects and Regulatory Implications

  • Regulatory Uncertainty: The legal battle underscores the challenges of regulating decentralized protocols and the need for clearer frameworks.
  • User Trust: While delisting may restore some trust, ongoing legal risks could impact user adoption.
  • Global Regulatory Landscape: This case sets a precedent for how other nations approach cryptocurrency mixer regulation and enforcement.

Conclusion

The delisting of Tornado Cash marks a significant regulatory milestone but leaves unresolved questions about future enforcement and the platform’s long-term viability. Businesses and developers must navigate these uncertainties while considering competitive opportunities in the evolving blockchain landscape.