Tornado Cash Delisting: A Legal Battle Between Coinbase CLO and US Treasury

Paul Grewal, Coinbase’s CLO, has fiercely denounced the way the US Treasury managed the Specially Designated Nationals(SDN) delisting regarding Tornado Cash in cryptocurrency discussions. Coinbase’s Chief Legal Officer, Paul Grewal, criticizes the Treasury’s attempt to reverse a legal decision because such action creates substantial difficulties in blockchain taxation and cryptocurrency regulation. The cryptographic trial has uncovered various security regulations combined with financial government policies.

The US Treasury’s Controversial Actions on Tornado Cash

The cryptocurrency mixing platform Tornado Cash faces scrutiny because the US Treasury removed previous blocking measures that indicated it laundered devices worth more than $500 million for Lazarus Group from North Korea. The public has expressed significant objections to the Treasury’s procedure for Tornado Cash delisting from the SDN list. Grewal joins other crypto community members in arguing that the process failed severely because the Treasury pushed to bypass court decisions on the matter.

Power does not recede voluntarily. It's gasps and it gasps until it no longer can. @USTreasury filed yet another late Friday pleading against Tornado Cash. After grudgingly delisting TC, they now claim they've mooted any need for a final court judgment. But that's not the law,… pic.twitter.com/Je8KD51X0q

— paulgrewal.eth (@iampaulgrewal) March 23, 2025

Grewal argues that the Treasury’s petition to avoid issuing a final court judgment represents an abnormal and hazardous development in this case. Under this condition, the Treasury Department can request a dismissal if it proves to stakeholders that the same problem will not resurface. Grewal warned that such authority could enable the Treasury to reintroduce sanctions on Tornado Cash while establishing dangerous firsts regarding the crypto-sanction policy.

Legal Implications and Fallout from Tornado Cash’s Delisting

The legal debate regarding Tornado Cash’s sanctions has continued for an extended period with complicated elements. The U.S. Department of Treasury included Tornado Cash on its SDN list in 2022 because the platform allegedly facilitated money laundering for North Korean operatives known as Lazarus Group. Tornado Cash users obtained successful court rulings that questioned US laws regarding classifying the crypto mixer’s smart contracts.

The court decided that Tornado Cash smart contracts failed to qualify as property according to the International Emergency Economic Powers Act (IEEPA) definitions. The decision established Tornado Cash’s immunity from US sanctions under federal law, even though the US Treasury has not officially complied.

Alexey Pertsev received legal backing from Coinbase and the Ethereum Foundation to help him as the lead developer of Tornado Cash. The ongoing developments in this case illustrate the problems that arise when attempting traditional legal system applications to increasingly complex cryptocurrency markets.

The Broader Impact on Crypto Regulations

The Tornado Cash case demonstrates cryptocurrency politics by highlighting regulatory development issues and government privacy-versus-regulation tensions. The legal difficulties experienced by Tornado Cash demonstrate the problem that exists between current laws and lightning-fast cryptocurrency technology development.

Paul Grewal receives support from crypto industry participants who question how much oversight the government should impose on decentralized financial systems. This ongoing case establishes the precedent for sanction enforcement and privacy restrictions and will likely result in additional scrutiny of crypto entities under US law.

The future status of Tornado Cash rests in doubt due to continuous attempts to challenge regulatory actions and navigate legal processes. The ongoing Tornado Cash delisting case will affect how the US Treasury Department and other worldwide regulatory bodies handle cryptocurrency mixing services and technologically related schemes. The crypto community follows this case closely because the Tornado Cash decision may establish guidelines for upcoming legal disputes in the crypto industry.