US Lifts Sanctions on Tornado Cash Amid Crypto Charm Offensive

The US Treasury has rescinded sanctions on cryptocurrency mixer Tornado Cash, allowing funds to flow through the service without fear of reprisal. The move comes after a federal appeals court ruled the Treasury had overstepped its remit in sanctioning Tornado. The decision is seen as a victory for the crypto industry, which had argued that Tornado's developers couldn't be held responsible for how wrongdoers use the service. The move is part of a series of Trump-era legal retractions by the US government in actions against crypto businesses.

The US Treasury's Office of Foreign Assets Control (OFAC) has recently rescinded sanctions on cryptocurrency mixer Tornado Cash, effectively allowing funds to flow through the service without fear of reprisal [1]. This decision comes after a federal appeals court ruled that the Treasury had overstepped its remit in sanctioning Tornado Cash.

Tornado Cash, a decentralized protocol that allows users to obfuscate the origin of their cryptocurrency transactions, has been a subject of controversy due to its association with illicit activities. According to a press release by the US Treasury, Tornado Cash has been used to launder over $7 billion worth of virtual currency since its creation in 2019 [1]. This includes funds stolen by the Lazarus Group, a North Korean state-sponsored hacking group, in the largest known virtual currency heist to date [1].

However, the crypto industry and Tornado Cash's developers argue that the service itself cannot be held responsible for how wrongdoers use it [2]. They claim that the decentralized nature of the protocol makes it impossible for the developers to control how it is used.

The decision to lift sanctions on Tornado Cash is part of a series of legal retractions by the US government in actions against crypto businesses. In May 2022, the Treasury sanctioned another virtual currency mixer, Blender.io [1]. However, the US government's efforts to crack down on illicit cryptocurrency activity continue, and it will likely continue to use its authorities to expose, disrupt, and hold accountable perpetrators and persons that enable criminals to profit from cybercrime and other illicit activity [1].

References:

[1] U.S. Department of the Treasury. (2022, September 16). U.S. Department of the Treasury Sanctions Virtual Currency Mixer Tornado Cash. https://home.treasury.gov/news/press-releases/jy0916
[2] De Vries, P. B., & Gombert, J. (2022, September 16). Tornado Cash Sanctions Lifted: A Victory for Privacy in Crypto? CoinDesk. https://www.coindesk.com/business/2022/09/16/tornado-cash-sanctions-lifted-a-victory-for-privacy-in-crypto/