US Treasury under Trump could take a different approach to Tornado Cash

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 in sanctioning certain smart contracts associated with the cryptocurrency mixer Tornado Cash. 

On Nov. 26, the US Court of Appeals for the Fifth Circuit ruled that OFAC “exceeded its statutory authority” when it sanctioned some of Tornado Cash’s immutable smart contracts in 2022. Though the ruling did not 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, told Cointelegraph that OFAC still had a “lot of authority” to sanction entities connected to Tornado Cash. However, according to Hughes, the Nov. 26 judgment would likely have the case go back down to the lower courts and have lawyers refile motions for summary judgment, a process which could “take months.”

With a new presidential administration under Donald Trump expected in 2025, the US Treasury could adapt its sanctions regime to align with the court decision or continue to fight the matter on appeal.

“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 said he believed that it was unlikely the Treasury would immediately change Tornado Cash’s sanctions status before Trump took office.

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

Trump said in 2018 that he and North Korean leader Kim Jong Un “fell in love” after an in-person meeting and exchanging letters. He largely did not discuss how he might handle sanctions involving the reclusive nation during his 2024 presidential campaign.

Related: Tornado Cash sees $1.9B resurgence this year despite sanctions

Under US President Joe Biden, OFAC added 44 Tornado Cash smart contract addresses to its list of Specially Designated Nationals in August 2022. The department alleged that individuals had used the mixer to launder more than $7 billion worth of crypto, including funds stolen by the North Korea-affiliated Lazarus Group.

However, Trump will likely bring new leadership to the Treasury and other government departments in January. On Nov. 22, the president-elect said he intended to nominate Scott Bessent, one of his donors and financial advisers, to Treasury Secretary in 2025.

In addition to the Fifth Circuit case, cryptocurrency advocacy group Coin Center filed a lawsuit against the US Treasury over Tornado Cash in 2022. There are parallels between the two cases, with lawyers for the respective parties arguing that the mixer itself or a related smart contract was not “property” subject to sanctions.

Prosecution of Tornado Cash developers

In 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.

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