Decentralization vs. the system: why the US lifted sanctions on Tornado Cash

No cryptocurrency hack is without Tornado Cash. The service is massively used to anonymize transactions, even though it has been under US sanctions for almost three years. GetBlock AML Research explains what may have motivated the US government to lift restrictions on Tornado Cash.

Tornado Cash. What is it and how does it work?

Tornado Cash is a decentralized, non-custodial crypto mixer designed to increase transaction privacy on public blockchains.

It uses smart contracts and zero-knowledge (ZK) proofs to hide the connection between the sender and receiver of a transaction on the blockchain.

The project was launched in 2019 as an experiment on the Ethereum network by Roman Storm and Roman Semenov. The main difference between Tornado Cash and other crypto mixers is its decentralized and non-custodial architecture. The smart contract of the project works separately and cannot be influenced by the network participants. Also, Tornado Cash does not interact with user funds directly, so it cannot control them. Later, Tornado Cash expanded its functionality and added support for other blockchains such as BNB Smart Chain (BSC), Optimism, Polygon, Arbitrum, and Avalanche.

Attention of the US authorities

In August 2022, Tornado Cash was sanctioned by the Office of Foreign Assets Control (OFAC) of the US Department of the Treasury. The agency argued its decision on the following grounds:

• OFAC has information that Tornado Cash has processed more than $7 billion since its creation in 2019, of which about 30% was obtained by illegal means;
• The crypto mixer processed $455 million in transactions by members of the North Korean hacker group, Lazarus Group;
• Tornado Cash provided services to cybercriminals who attacked US companies while overseas. According to OFAC, this could be considered a threat to US national security.

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How the sanctions worked

The case with the imposition of sanctions against Tornado Cash became historic. For the first time in the history of the United States, restrictive measures were imposed not against a specific person or group of persons (organization), but against software code. The US authorities managed to block Tornado Cash’s interface on the Internet (the service’s website), but the smart contract itself was not affected. Immediately after the blocking of the main website, several Tornado Cash mirrors appeared on the darknet, with the help of which one can get access to the service. Despite the sanctions, Tornado Cash continued to operate and process transactions.

Tornado Cash web interface

The developers of Tornado Cash were also subjected to charges: developer Alexey Pertsev was arrested in the Netherlands on suspicion of concealing illegal financial flows and facilitating money laundering. In 2023, the creators of the mixer, Roman Storm and Roman Semenov, were accused of involvement in the laundering of cryptocurrency worth more than $1 billion.

Sanctions lifted

After the introduction of restrictions against Tornado Cash, many well-known figures in the crypto community, such as Ethereum co-founder Vitalik Buterin, spoke out in defense of the smart contract and its developers. The situation was complicated by other facts: the impossibility of suspending the work of Tornado Cash, as well as the uncertain legal status of the smart contract, which can not be considered the property of its developers.

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Due to a large number of inconsistencies and legal uncertainty, in March 2025, the US Treasury Department lifted sanctions against Tornado Cash, although criminals continue to actively use the service. Alexey Pertsev was also released from custody. Legal proceedings against the creators of Tornado Cash are still ongoing. They are accused of not even trying to introduce AML mechanisms into their developments.