The Fifth Circuit Court of Appeals has just lifted U.S. sanctions on cryptocurrency tool Tornado Cash in a big win for privacy and decentralized technology. Tornado Cash is a bootstrapped privacy solution that mixes cryptocurrency so it no longer reveals the source or destination. This is considered to be a key moment for privacy tools within the digital world.
The U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) placed sanctions on Tornado Cash in 2022, accusing it of helping hackers launder money.
It was alleged to be used by North Korea hacking team Lazarus Group for hiding over $455 million in cybercrimes. The government placed Tornado Cash on a special list that blocked anyone from using it.
But, a Fifth Circuit in Court ruled on January 21, 2025, OFAC’s sanctions went too far. Tornado Cash operates on ‘smart contracts’ — bits of code that run on their own, and that the creators of them can’t control. The court said that since these smart contracts can’t be owned like regular property, they shouldn’t be sanctioned.
The decision comes after six users sued the organization six years ago, stating that Tornado Cash was merely a tool, and not a person or organization that could be punished. The court said the International Emergency Economic Powers Act, the law underpinning the sanctions, wasn’t intended to cover something like Tornado Cash.
The TORN token, Tornado Cash’s token, spiked as high as $25 before falling to $18.6 after the ruling. Vitalik Buterin, co-founder of Ethereum, celebrated the decision and voiced support for Tornado Cash developers, who were arrested as part of the project.
I'll out myself as someone who has used TC to donate to this exact cause.
— vitalik.eth (@VitalikButerin) August 9, 2022
This marks one of the first times that privacy technology is considered under the law, showing how the conflict between innovation and regulation in the digital world is quickly heating up.
Also read: Vitalik Buterin Shares Strategy to Scale Ethereum and Strengthen ETH
