Tornado Cash Sanctions Lifted as U.S. Court Rules Against OFAC Ban

In a landmark legal decision, the Office of Foreign Assets Control (OFAC) has removed Tornado Cash from its Specially Designated Nationals (SDN) list, effectively reversing its prior sanctions. The move follows a ruling by the Fifth Circuit Court of Appeals, which found that OFAC overstepped its authority in sanctioning the open-source cryptocurrency mixer.

Court Ruling Limits Government Oversight of Smart Contracts

The court’s decision signals a major shift in how decentralized technologies are regulated. The ruling clarified that Tornado Cash, as an open-source smart contract, cannot be sanctioned like a traditional financial entity. This distinction could set a precedent for future regulatory actions involving decentralized finance (DeFi) platforms and privacy tools.

Why It Matters for Crypto Privacy

The original sanctions on Tornado Cash were imposed in August 2022, citing its use in laundering illicit funds. However, the ruling has reignited debates over financial privacy and freedom of speech in the blockchain space. Many industry leaders argue that blocking open-source code infringes upon fundamental rights.

Coinbase CEO Brian Armstrong welcomed the ruling, stating:

“No one wants to see bad folks use crypto. But privacy is an important feature for many law-abiding citizens, and you can’t sanction open-source code (it’s a free speech issue). Glad to see this get fixed.”

No one wants to see bad folks use crypto. But privacy is an important feature for many law abiding citizens, and you can’t sanction open source code (it’s a free speech issue). Glad to see this get fixed.

We look forward to working with Treasury to find ways to combat the ~0.1%… https://t.co/O6M8IXhdDL

— Brian Armstrong (@brian_armstrong) March 21, 2025

He also emphasized the need for collaboration with regulators to combat illicit activity in crypto, which he noted accounts for only 0.1% of transactions—far less than cash or the banking system.

Community Reaction:

• @GuantesNesto: Privacy is a cornerstone of freedom. Let’s push for transparency without sacrificing liberty.
• @depressivehacks: Traditional finance is used for crime all the time, but no one calls for shutting it down…
• @godefi_me: Great to see free speech valued in the future of finance.

What’s Next?

The reversal of Tornado Cash’s sanctions raises important questions about the future of privacy protocols in crypto. While regulators remain focused on curbing illicit transactions, this decision may open the door for privacy-enhancing technologies to operate under more defined legal frameworks.

As the conversation around privacy vs. regulation continues, this ruling could mark the beginning of a more balanced approach to decentralized technology oversight, ensuring both compliance and financial privacy for users worldwide.