The US government has dropped sanctions against Tornado Cash, a cryptocurrency mixer accused of helping North Korean hackers launder millions. This follows a court decision that said the Treasury Department overstepped its authority.
The Case Against Tornado Cash
Tornado Cash was on a US sanctions list since 2022, accused of processing over $455 million in stolen crypto. The US government argued this was part of a broader effort to fight North Korean cybercrime. They claimed Tornado Cash laundered a total of over $7 billion since 2019.
The Court’s Decision
A federal appeals court ruled that the Treasury Department’s actions were illegal. They argued that the code behind Tornado Cash isn’t considered “property” under the law used to freeze assets for national security reasons. This essentially means the government couldn’t legally sanction the code itself.
Sanctions Lifted, But Concerns Remain
Following the court ruling, the Treasury Department removed Tornado Cash from the sanctions list. While acknowledging the court’s decision, they stressed their ongoing concerns about North Korean hacking and money laundering. Treasury Secretary Scott Bessent highlighted the need to balance protecting the digital asset industry from abuse with fostering innovation.
Despite the lifted sanctions, reports suggest North Korean hackers continue to use Tornado Cash. The legal battles aren’t over either. One of Tornado Cash’s co-founders is under arrest, another is still wanted, and a developer recently received a lengthy prison sentence.
A “Historic Win” for Crypto?
Coinbase, a major cryptocurrency exchange that supported the legal challenge, hailed the decision as a major victory for the crypto industry. They argued that blocking open-source technology because of the actions of a few shouldn’t be allowed. However, the ongoing use of Tornado Cash by malicious actors highlights the complex challenges of regulating decentralized finance.
