The US Treasury has lifted sanctions on Tornado Cash, a cryptocurrency mixer that was previously accused of laundering $7 billion worth of stolen crypto by North Korean hackers. The decision comes after a legal battle, with the Treasury citing "exercise of discretion" as the reason for delisting the entity.

Tornado Cash is a type of crypto mixer that allows customers to conceal the origin of their cryptocurrency, including tainted or illicit funds, by blending them with other crypto. The Treasury had accused the mixer of being "notorious" for its role in laundering stolen crypto from hacks carried out by North Korea, whose goal is to fund its nuclear weapons program.

In 2022, the Treasury imposed sanctions on Tornado Cash, making it illegal for Americans or US businesses to transact with the entity. The move was seen as a significant step in the US government's efforts to crack down on cryptocurrency-based money laundering and terrorist financing. However, the legal battle that ensued has now led to the delisting of Tornado Cash.

In August 2023, the two founders of Tornado Cash were criminally charged in a New York federal court, accused of conspiracy to launder money and sanctions violations. The charges highlighted the US government's concerns about the role of crypto mixers in facilitating illegal activities. Despite this, the Treasury has now decided to lift the sanctions, citing "exercise of discretion" as the reason.

While the delisting of Tornado Cash may come as a surprise to some, it is worth noting that the Treasury has emphasized that it remains "deeply concerned" about the threat of crypto hacks from the North Korean regime. The move is likely seen as a tactical decision to prioritize other efforts to combat cryptocurrency-based illicit activities.

The implications of this decision are significant, as it may pave the way for other crypto mixers to operate more freely. However, it also raises questions about the effectiveness of sanctions as a tool in combating cryptocurrency-based money laundering and terrorist financing. As the crypto industry continues to evolve, it remains to be seen how governments will adapt their strategies to address these challenges.

In the broader context, the delisting of Tornado Cash highlights the ongoing cat-and-mouse game between governments and crypto entities. As governments seek to regulate and monitor cryptocurrency transactions, crypto entities are continually finding ways to evade detection and exploit loopholes. The Tornado Cash saga serves as a reminder of the complexities and challenges involved in regulating the crypto space.