Tornado Cash 2.0: The race to build safe and legal coin mixers

Many in the crypto industry are still reeling from an appellate court decision that the United States Department of the Treasury's Office of Foreign Assets Control (OFAC) overstepped

A recent appellate court decision has brought into question the United States Department of the Treasury’s Office of Foreign Assets Control’s (OFAC) authority to sanction certain smart contracts associated with the cryptocurrency mixer Tornado Cash. The court ruled that OFAC had “exceeded its statutory authority” in sanctioning some of Tornado Cash’s immutable smart contracts in 2022.

While the ruling did not definitively close the door on the Treasury Department’s case, the six plaintiffs backed by Coinbase could see a policy change starting in 2025 that could impact how the courts handle addresses associated with crypto mixers.

Bill Hughes, Consensys’ senior counsel and director of global regulatory matters, provided his insights on the matter in an interview with Cointelegraph. According to Hughes, OFAC still had a “lot of authority” to sanction entities connected to Tornado Cash. However, he explained that the Nov. 26 judgment would likely result in the case being remanded to the lower courts, where lawyers could refile motions for summary judgment, a process that could “take months.”

Hughes further commented on the possibility of a new presidential administration under Donald Trump in 2025 and how it could affect the Treasury’s sanctions regime. He expressed his belief that the administration might adapt its approach to align with the court decision.

“I actually think under a Trump administration, it’s more likely that this opinion will be adopted as Treasury policy,” said Hughes.

However, the Consensys SC clarified that he did not anticipate the Treasury changing Tornado Cash’s sanctions status immediately before Trump takes office.

“It is to be seen how hawkish the Trump administration is on these national security issues as they relate to crypto,” Hughes added. “I could see the Treasury under a Trump administration basically adopting the court’s analysis of immutable smart contracts.”

During his 2024 presidential campaign, Trump stated that he and North Korean leader Kim Jong Un “fell in love” after meeting in person and exchanging letters. However, he largely refrained from discussing how he might handle sanctions involving the reclusive nation.

In August 2022, during President Joe Biden’s term, OFAC added 44 Tornado Cash smart contract addresses to its list of Specially Designated Nationals. The department claimed that individuals had used the mixer to launder over $7 billion in crypto, including funds stolen by the Lazarus Group, which is linked to North Korea.

After the appellate court ruling, Trump will likely appoint new leadership to the Treasury and other government departments in January. On Nov. 22, the president-elect announced his intention to nominate Scott Bessent, one of his donors and financial advisers, to the role of Treasury Secretary in 2025.

Apart from the Fifth Circuit case, cryptocurrency advocacy group Coin Center also filed a lawsuit against the US Treasury over Tornado Cash in 2022. Both cases involve lawyers arguing that the mixer itself or a related smart contract does not constitute “property” subject to sanctions.

Prosecution of Tornado Cash DevelopersIn 2023, US authorities with the Justice Department announced charges against Tornado Cash co-founders Roman Storm and Roman Semenov. Storm was arrested and is scheduled to go to trial in April 2025 after Trump takes office, while Semenov was on the FBI’s most wanted list at the time of publication.

“If I had to bet, I think the prosecution [of Storm] is going to go forward,” said Hughes. “They’re going to have the trial, and he’s either acquitted, or there’s going to be calls from the crypto community for President Trump to commute his sentence or pardon him outright.”

Authorities in the Netherlands sentenced the third Tornado Cash co-founder, Alexey Pertsev, to more than five years in prison for money laundering. He remains in custody as his lawyers prepare to appeal the conviction and sentence.