Analysis Is the US retreating from its hardline stance on crypto? On Friday, the US Treasury Department lifted sanctions imposed on notorious crypto mixer Tornado Cash, once accused of washing billions in illicit crypto for criminals and nation-states alike.

In 2022, the Biden administration alleged that Tornado Cash had laundered upwards of $7 billion in virtual currency since 2019, including $455 million stolen by North Korea’s Lazarus Group, leading to sanctions that prohibited its use. In 2023, US prosecutors indicted two of the founders of Tornado Cash, alleging the service facilitated more than $1 billion in criminal proceeds.

However, following a federals appeal court ruling in November which questioned the Treasury’s authority to ban the crypto mixer’s smart contracts as they were not the “property” of any foreign national, the sanctions have now been lifted, though authorities continue to express concerns about the platform’s misuse.

“We remain deeply concerned about the significant state-sponsored hacking and money laundering campaign aimed at stealing, acquiring, and deploying digital assets for the Democratic People’s Republic of Korea (DPRK) and the Kim regime,” the department said in a statement.

“Treasury remains committed to using our authorities to expose and disrupt the ability of malicious cyber actors to profit from their criminal activities through the exploitation of digital assets and the digital assets ecosystem. Treasury will continue to monitor closely any transactions that may benefit malicious cyber actors or the DPRK, and US persons should exercise caution before engaging in transactions that present such risks.”

Cryptocurrency mixers are services that blend multiple users’ cryptocurrencies to obscure transaction origins and destinations, enhancing privacy but also potentially facilitating money laundering.

Tornado Cash, launched in 2019 as an open-source Ethereum mixer, was intended to improve transaction privacy but was also exploited by malicious actors for illicit purposes.

One of the software’s developers – Alexey Pertsev – was arrested by Dutch authorities in 2022 and convicted on money laundering charges in 2024, receiving a sentence of 64 months. He is currently appealing that verdict.

In August 2023, US authorities indicted Tornado Cash co-founders Roman Storm and Roman Semenov on charges including conspiracy to commit money laundering and sanctions violations. Storm was arrested and is fighting his case, while Semenov has eluded the authorities and is on the FBI’s wanted list, for now.

America’s future is digital

The Treasury’s decision to lift sanctions on Tornado Cash aligns with a broader shift in the current administration’s approach to digital currency regulation.

Also on March 21, the Securities and Exchange Commission’s Crypto Task Force held a public roundtable to discuss how existing securities laws apply to digital assets, and to consider the development of a new regulatory framework tailored to these technologies.

The meeting follows a busy week on the cryptocurrency front from the SEC. On March 19, the SEC dropped its appeal in a five-year legal case against XRP token supplier Ripple Labs, and two of its senior executives – cofounder Christian Larsen and CEO Bradley Garlinghouse.

“This is it – the moment we’ve been waiting for. The SEC will drop its appeal – a resounding victory for Ripple, for crypto, every way you look at it,” said Garlinghouse on X. “The future is bright. Let’s build.”

About two weeks earlier, Garlinghouse met with President Trump to discuss the future of cryptocurrency and its regulation. He also reportedly donated $5 million to Trump’s inaugural committee.

In the 2020 case, the SEC alleged that Ripple Labs raised approximately $1.3 billion through unregistered sales of XRP, violating federal securities laws. In July 2023, a court ruled that XRP sales on public exchanges did not qualify as securities transactions, though Ripple’s direct sales to institutional investors did meet the criteria. The SEC initially appealed the decision, but withdrew its appeal mid-last week, leading to a more than 10 percent surge in XRP’s price.

The SEC subsequently clarified that because proof-of-work cryptocurrency mining activities do not involve the offer or sale of securities, they fall outside the agency’s regulatory remit.

“It is the Division’s view that ‘Mining Activities’ in connection with Protocol Mining, under the circumstances described in this statement, do not involve the offer and sale of securities within the meaning of Section 2(a)(1) of the Securities Act of 1933 and Section 3(a)(10) of the Securities Exchange Act of 1934,” it said.

“Accordingly, it is the Division’s view that participants in Mining Activities do not need to register transactions with the Commission under the Securities Act or fall within one of the Securities Act’s exemptions from registration in connection with these Mining Activities.”

A bipartisan issue

The issue of cryptocurrency hasn’t just been on the regulatory agenda, politicians are taking a closer look as well.

Earlier this month, a bipartisan group of senators updated pending legislation dubbed the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, which was passed by the US Senate Banking Committee.

The GENIUS Act was introduced in February and is designed to clarify the law in relation to stablecoins – digital currency that is tied to a traditional asset, like the US dollar. It would ensure that stablecoin suppliers obey anti-money laundering rules, ensure digital cash is tied to a real asset, and mandate regular audits and public disclosures to ensure transparency and consumer protection.

“The updated version of the GENIUS ACT makes significant improvements to a number of important provisions, including consumer protections, authorized stablecoin issuers, risk mitigation, state pathways, insolvency, transparency, and more,” said co-sponsor Senator Kirsten Gillibrand (D-NY).

Gillibrand is not the only Democratic politician to support the legislation, and it’s likely that it will need to hit the 60-vote threshold to pass into law with cross-party support. However, the ranking member of the committee, Senator Elizabeth Warren (D-MA), was not pleased with the result.

“The bill ignores basic consumer protections that apply to every other financial product available in America. If you’re sending a US dollar from your PayPal wallet, and you get scammed, the CFPB has the authority, right now, to help you get your money back. But if this bill passes, and you’re sending a stablecoin from your PayPal wallet and you get scammed, you may be out of luck,” she opined.

“In fact, the bill even invites scammers into the market by refusing to prohibit people convicted of fraud and money laundering from owning stablecoin companies. Sam Bankman-Fried could buy a stablecoin company from prison and regulators would have no legal grounds to stop him under this bill.”

While the House of Representatives has yet to take up the bill, strong bipartisan support for stablecoin regulation suggests it could receive a favorable reception once introduced. ®