Here’s how investors can withdraw locked crypto in Tornado Cash

In this post:

  • The Department of Treasury has issued new guidelines on how to withdraw assets from the now-banned Tornado Cash
  • Multiple investors challenge the sanction decision by OFAC in court
  • OFAC has stated that no more action can be taken on the platform for U.S citizens from this point onwards

It’s yet another gloomy day for the crypto industry. The U.S. Department of Treasury recently targeted Tornado Cash. The penalties were a one-of-a-kind action by Treasury to blacklist open source software rather than an organization or individual.

Crypto enthusiasts have come out against the decision, claiming it was an overreach. The introduction of this legislation could have far-reaching implications for the tech sector and has been described as a “game-changer.”

However, the news is not all bad for Tornado Cash crypto investors. The U.S. Department of Treasury has just issued rules (FAQ) on how to withdraw funds from the outlawed crypto entity.

Tornado Cash; what it is and why the U.S. government sanctioned it

On August 8, the Treasury blacklisted and added the Ethereum (ETH)-based program to the Specially Designated Nationals list due to a national-security problem. This list contains persons, organizations, and crypto addresses that U.S. citizens are not permitted to use. Users of Tornado Cash have been unable to access the platform’s assets or any Ethereum wallets linked with it.

The move prompted a tremendous outcry from the crypto sector. They had questions ranging from whether software could be targeted to how individuals who used Tornado Cash for legal activities might retrieve any money trapped in the tool’s smart wallets. The Ethereum privacy mixer was banned last month on accusations that North Korean hackers used it to launder money.

According to the Treasury Department, a North Korea-linked hacking organization known as the Lazarus Group sent millions of dollars worth of cryptocurrency through Tornado Cash, claiming that over 20% of the mixer’s volume was connected to criminal activity.

The most critical point that crypto experts have made is that Tornado, unlike other sanctioned institutions, does not have a management structure, making it ineligible for a blacklist. Furthermore, because it’s mostly a program run on Ethereum, it’s protected by the First Amendment.

Subsequently, after sanctions were announced, actions such as the arrest of one of Tornado’s developers by Dutch police have been viewed even more dubiously. The Treasury seems to have acknowledged some of these arguments, as Tuesday’s guidelines also state that while interacting with Tornado is not allowed, interacting with its code is fine.

Recently, six plaintiffs–including Coinbase–have filed a lawsuit challenging the decision to sanction Tornado, seeing it as setting a dangerous precedent. Several organizations have started to explore legal action against OFAC because of the sanctions surrounding Tornado Cash. Recently, Tornado’s DAO voted to take the Treasury to court.

U.S. Treasury releases guidelines on how to withdraw crypto from Tornado Cash

The Office of Foreign Assets Control has established regulations describing how Tornado Cash users can redeem their funds. Only the assets involved in transactions before August 8 and not used in “sanctionable behavior” may be removed.

On Tuesday, the U.S. Treasury Department’s sanctions watchdog, its Office of Foreign Asset Control (OFAC), updated its “frequently asked questions” (FAQs) document to guide the crypto industry on how individuals and companies can comply with sanctions against Tornado Cash.

According to the guidelines, users will need to request a specific license from OFAC. Furthermore, they must also provide wallet addresses for both the remitter and beneficiary as well as transaction hashes. Lastly, transactions must include the date and time stamp and the number of digital assets involved in the complaint.

U.S. persons should be prepared to provide, at a minimum, all relevant information regarding these transactions with Tornado Cash, including the wallet addresses for the remitter and beneficiary, transaction hashes, the date and time of the transaction(s), as well as the amount(s) of virtual currency. OFAC would have a favorable licensing policy towards such applications, provided that the transaction did not involve other sanctionable conduct.


According to OFAC, no more action can be taken on the platform for U.S. citizens from this point onwards. If any U.S. members were to start or get involved in a transaction with Tornado Cash, including its wallet addresses, it would go against U.S. sanctions and regulations – unless authorized by OFAC, of course.

Important matters addressed in the OFAC FAQ

The FAQs addressed the fact that after the sanctions were announced, individuals attempted to troll celebrities by sending them tiny quantities of ether through Tornado Cash. The FAQs clarify that while U.S. citizens are not permitted to engage in any act with Tornado Cash if a small amount of money is given to them without their permission, they do not have to report the transaction right away.

According to the study, Coin Center concluded that the government agency exceeded its legal authority and has not adequately addressed the foreseeable consequences of [its] actions on innocent people. The organization said they planned to start discussing the issue with regulators and might even take the case to court.

Meanwhile, Coinbase, one of the world’s most popular cryptocurrency exchanges, has decided to pay the costs associated with the lawsuit filed against the Department. The Exchange feels that this ban poses a major risk to technological platforms and that regulators should devise an appropriate legal framework.

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.

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