Why Tornado Cash Was Removed From OFAC's Sanctions List

Last month, the U.S. Treasury Department’s Office of Foreign Asset Control (OFAC) removed Tornado Cash from its sanctions list. This decision came after a Fifth Circuit Court ruling stated that the agency could not enforce sanctions against the smart contracts associated with the mixer.

Importance of This Decision

The question of whether Tornado Cash could be sanctioned had been contentious within the cryptocurrency sector. Following the Fifth Circuit’s ruling, there was a notable surge in the price of the TORN token, highlighting hopes that regulatory hurdles for legal uses of mixers might become less strict.

Details on the Delisting

Tornado Cash being delisted included sanctions against its smart contracts, which followed the court’s ruling in November. This may have been an attempt by OFAC to act before a potentially unfavorable court ruling.

A coalition of developers, supported by Coinbase, had previously sued OFAC when Tornado Cash was sanctioned. The lawsuit, Van Loon v. Treasury, initially favored the Treasury, but the Fifth Circuit’s appeal ruled that smart contracts fell outside of OFAC’s jurisdiction.

In a March 21 notice, OFAC communicated that the delisting rendered the legal case moot.

Peter Van Valkenburgh, the executive director at Coin Center, remarked that OFAC had limited options after the court’s ruling. ‘They could have waited for the court to invalidate the sanctions or they could have delisted them themselves, and they decided to delist,’ he noted.

Meanwhile, Attorney Leah Moushey indicated that the court could potentially dismiss OFAC’s filing, as the priority might be whether Tornado Cash could be sanctioned again in the future.

Additional Context: Tornado Cash’s delisting does not affect the ongoing criminal case against developer Roman Storm. His legal representation has motioned for dismissal based on the Fifth Circuit’s ruling, yet the case proceeds.

The implications of this shift can be significant, as it may lead to new discussions on how regulators approach crypto instruments and their legislation.