In a groundbreaking decision for the cryptocurrency industry, a U.S. appeals court has ruled that the U.S. Treasury Department overstepped its authority by imposing sanctions on Tornado Cash, a decentralized Ethereum-based privacy protocol. The ruling, which has sent shockwaves through the digital asset community, marks a significant victory for crypto privacy advocates and challenges the government's approach to regulating decentralized technologies.
Tornado Cash, launched in 2019, functions as a crypto mixer, pooling transactions to obscure their origins and destinations on the blockchain. This feature, while celebrated for enhancing user privacy, drew scrutiny from regulators who accused the protocol of facilitating over $7 billion in money laundering, including funds linked to North Korean hackers. In 2022, the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned Tornado Cash, a move that sparked intense legal battles.
The court’s decision, issued on November 26, 2024, by the Fifth Circuit Court of Appeals, explicitly stated that the Treasury lacked the legal authority to impose such sanctions on a decentralized tool. This ruling not only overturns the sanctions but also sets a precedent that could limit future governmental overreach in policing crypto transactions.
Adding to the significance of this case, the U.S. Treasury recently dropped its appeal in a related lawsuit with Coin Center, an advocacy group, as reported on July 8, 2025. This joint agreement to dismiss the case further solidifies the legal retreat and underscores a turning point for regulatory oversight in the crypto space.
The implications of this ruling are far-reaching, potentially reshaping how privacy-focused tools are viewed under U.S. law. Advocates argue that this decision protects the fundamental right to financial privacy, while critics warn it could complicate efforts to combat illicit activities on blockchain networks.
As the legal landscape evolves, the Tornado Cash case remains a focal point in the ongoing debate over balancing innovation, privacy, and security in the cryptocurrency world. With one of its co-founders, Roman Storm, set to face trial in New York starting July 14, 2025, the saga is far from over, keeping the spotlight on the future of decentralized technologies.
Maria Lourdes
