Just last month, the Treasury took the surprising step of reversing its sanctions on Tornado Cash. Almost immediately, voices across the crypto community grew louder, urging the Trump administration to drop the charges against Keonne Rodriguez and William Lonergan Hill, the Samourai Wallet developers currently facing prosecution in the Southern District of New York.

But here’s something crucial that seems to have slipped under the radar: the Treasury’s Tornado Cash about-face inadvertently revealed their real position on privacy services. And let’s just say, it’s not a pretty picture.

Tornado Cash’s journey off OFAC’s SDN list wasn’t a voluntary concession. It was actually triggered by a lawsuit from Tornado Cash users. This case, known as Van Loon v. US Department of the Treasury in a Texas District Court, challenged the sanctions, arguing they were illegal and trampled on free speech rights.

The lawsuit then went to the Fifth Circuit Court of Appeals, and in a significant win, three judges agreed. They ruled that slapping sanctions on software like Tornado Cash was indeed unlawful, pointing out that OFAC’s SDN list is meant for businesses, individuals from other countries, and property – and software doesn’t fit any of those categories.

So, the Fifth Circuit instructed the Texas District Court to effectively finalize the win for the plaintiffs, granting them a partial summary judgment. This would have been huge – a legally binding court order preventing the US Government from sanctioning software like Tornado Cash under current laws.

But the Treasury isn’t backing down. They’re pushing back hard, trying to avoid this judgment that would limit their power to sanction privacy-focused software. Their argument? They’ve already removed Tornado Cash from the OFAC list, so a judgment isn’t necessary. However, this is a clever maneuver. Without that court order, the Treasury could easily turn around and sanction other software that works like Tornado Cash – or even re-sanction Tornado Cash at any time.

Now, it’s important to understand that this whole Tornado Cash sanction reversal isn’t directly related to the Samourai Wallet developers’ prosecution – neither are charged with actually evading sanctions.

However, the ongoing criminal prosecution of Tornado Cash developer Roman Storm is incredibly relevant to Rodriguez and Hill. Why? Because Storm’s case could set a legal precedent that directly impacts them. They are facing serious charges: conspiracy to operate as an unlicensed money transmitter and conspiracy to commit money laundering.

It’s crucial to remember that both Tornado Cash and Samourai Wallet are non-custodial software. For a long time, these types of projects were understood to be outside the scope of anti-money laundering regulations, which are typically applied to banks and financial institutions. But if Storm is found guilty in his trial this July, it would pave the way for the Government to much more easily prosecute the Samourai Wallet developers.

Many of us held out hope that the change in administration would mean an end to what felt like a ‘witch hunt’ against crypto developers under the previous administration. But it’s becoming clear that the current Treasury, under Trump, is just as hostile to the development of privacy-enhancing code.

As CoinCenter astutely observed late last year, just because an administration is ‘pro-crypto’ doesn’t automatically mean they’re pro-privacy or pro-financial freedom. And now we’re seeing exactly what that means play out in real-time. While regulatory heat seems to be easing off for major ‘crypto casinos’ like Coinbase and Uniswap, developers building privacy tools like Rodriguez and Hill are still staring down the barrel of potentially decades behind bars.

The Treasury’s justification for these aggressive prosecutions seems to be rooted in their unwavering stance against terrorist financing and cybercrime. As they stated in the announcement about reversing the Tornado Cash sanctions:

“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.”

In a move that feels like a stark escalation, the Treasury also issued a direct warning to users of privacy services. They cautioned that “U.S. persons should exercise caution before engaging in transactions that present such risks.”

Reinforcing the Treasury’s message, blockchain surveillance firm Chainalysis, in an email about the Tornado Cash sanctions reversal, seemed to echo the government’s concerns. They advised that “organizations with exposure to [mixer] addresses should seek legal counsel on their responses and obligations to OFAC.”

The message coming through loud and clear? While using mixing services isn’t officially illegal right now, the Treasury is definitely keeping the door wide open to pursue charges against anyone and everyone involved with privacy services down the line.

And as I’ve argued before in Bitcoin Magazine print articles, this aggressive stance shouldn’t come as a surprise. It’s almost an inevitable consequence of trying to shoehorn digital assets into existing U.S. regulatory frameworks. The more important Bitcoin becomes in the eyes of the government, the greater the pressure will be to aggressively police and eliminate any activity they deem illicit or criminal within the space.

Treasury Secretary Scott Bessent even essentially confirmed this rationale when announcing the Tornado Cash sanctions reversal, stating: “securing the digital asset industry from abuse by North Korea and other illicit actors is essential to establishing U.S. leadership and ensuring that the American people can benefit from financial innovation and inclusion.”

While the narrative often points to North Korea’s alleged use of cryptocurrency for funding, the actual proportion of illicit funds in the crypto ecosystem is incredibly small. Chainalysis, the same firm mentioned earlier, themselves place it at a mere 0.14% of all on-chain transactions.

But here’s the critical counterpoint: there are countless legitimate reasons why ordinary people use privacy services. In a world where every transaction is permanently and publicly recorded on the blockchain, privacy tools are essential for safeguarding transaction history and personal wealth – which becomes increasingly important for physical safety.

As Jameson Lopp constantly emphasizes in his physical Bitcoin attacks repository, making your Bitcoin holdings public information can have terrifying real-world consequences. It can lead to violent home invasions, kidnappings, and tragically, even murder.

This relentless government crackdown on privacy services feels wildly disproportionate to the stated goal of targeting a tiny 0.14% of illicit activity. It really seems like the current administration is simply not interested in doing the right thing when it comes to protecting everyday Americans and #FreeSamourai.

This is a guest post by L0la L33tz. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.