Treasury Drops Tornado Cash Appeal After Policy Shift

The U.S. Treasury Department has withdrawn its legal appeal involving the Ethereum mixer Tornado Cash, effectively closing a significant sanctions enforcement case. This decision came after the Office of Foreign Assets Control (OFAC) removed Tornado Cash from its sanctions list, marking a notable shift in the government's policy towards decentralized financial technologies. The Eleventh Circuit Court approved the motion to dismiss the case, which was jointly filed by both parties following OFAC's policy reversal. The court's action erases prior rulings without the need for further hearings, highlighting the complexity and evolving nature of regulating blockchain technologies.

OFAC had originally blacklisted Tornado Cash in 2022, citing national security concerns. However, in March 2025, the Treasury reversed its position due to legal and technological complexities. Coin Center and the Treasury agreed that the case was moot, as enforcement actions had already ceased. This dismissal underscores the challenges in enforcing sanctions against decentralized protocols and the need for a more nuanced approach to regulating cryptocurrencies.

Despite the dismissal of the civil appeal, the criminal proceedings against Tornado Cash co-founder Roman Storm remain active. Storm is set to stand trial on July 14 in New York on federal charges of conspiring to launder over $1 billion through the Tornado Cash platform. Prosecutors allege links between Storm and the Lazarus Group, a North Korean state-backed cybercrime organization. Storm's legal defense argues that the software's smart contracts are immutable and beyond human control, a defense that has been rejected in other jurisdictions but may find more sympathy in U.S. courts.

Storm's trial will test the legal boundaries of financial privacy tools and could set a lasting precedent in crypto regulation. He faces up to 45 years in prison if convicted of all charges. The Ethereum Foundation has contributed $500,000 to support Storm's legal defense, highlighting the broader implications of this case for the cryptocurrency community. The outcome of Storm's trial will be closely watched as it could shape future enforcement actions and regulatory frameworks for decentralized financial technologies.

Following OFAC's removal of Tornado Cash from its sanctions list, the Department of Justice (DOJ) has adjusted its crypto enforcement policies. A memo stated that the government would not pursue cases involving decentralized software unless direct criminal intent is proven. This shift reflects the growing legal complexity in regulating open-source blockchain technologies and the need for a more balanced approach that considers the innovative potential of these tools. Supporters argue that targeting code rather than conduct threatens innovation and violates basic rights, and U.S. courts are now being asked to define the limits of responsibility for autonomous protocols.