Crypto: The American Justice System Lifts Sanctions Against Tornado Cash

A federal court in Texas has just overturned the sanctions imposed against the crypto mixing protocol, Tornado Cash. This decision marks a decisive turning point in the regulation of privacy technologies and could redefine the authorities’ approach to decentralized protocols.

Tornado Cash wins a legal battle against the OFAC

On January 21, 2025, the federal court for the western district of Texas overturned the sanctions imposed by the Office of Foreign Assets Control (OFAC) against Tornado Cash. This decision follows a lawsuit filed in November 2024 by six users, who challenged the legality of these sanctions.

Their central argument: Tornado Cash, being an autonomous computer program (smart contract) on the blockchain, cannot be likened to a property or a sanctionable entity. This technical characteristic would place it outside the jurisdiction of the OFAC.

As a reminder, the OFAC sanctioned Tornado Cash in August 2022, accusing it of enabling the laundering of 455 million dollars by the North Korean hacker group Lazarus. However, the court ruled that the decentralized nature of smart contracts excludes them from the category of sanctionable property under U.S. law.

This legal victory caused the value of the TORN token to surge, climbing 120% to temporarily reach 22 dollars. But beyond this specific case, this decision signifies a major turning point for the regulation of decentralized technologies in the future.

Major stakes for the future of privacy protocols

This historic decision comes at a time when Ross Ulbricht, the founder of Silk Road, has just been pardoned by President Donald Trump. This conjunction of events could signal a shift in the approach of U.S. authorities toward blockchain technologies.

For Matthew Niemerg, co-founder of AlephZero, the major challenge will now be to develop privacy protocols that comply with regulations. This decision indeed opens the way to a more balanced framework between innovation and compliance.

However, the annulment of sanctions against Tornado Cash does not resolve all controversies. Alexey Pertsev, one of the protocol’s developers, remains imprisoned following his conviction for money laundering by the Dutch judiciary in May 2024. 

In summary, this legal victory nevertheless marks a major turning point for the future of privacy technologies. The SEC has already established a special commission to develop a clear regulatory framework tailored to the crypto sector and the associated technological innovations.