Lynn Johannson, Advisor, Sustainability and ESG
January 4th, 2024
Lynn Johannson, President of E2 Management Corporation and Catalyst for THE Collaboration
In a care[...]
U.S. Deregulates Ownership Rules, Frees Tornado Cash
De-regulation | March 24, 2025
Image: Freepik/wirestock
U.S. Rolls Back Corporate Transparency Rules & Lifts Restrictions on Tornado Cash
On Friday March 21 2025, the Trump administration made two announcements related to the relaxation of financial oversight and corporate transparency requirements. First, the U.S. Treasury removed economic sanctions placed on Tornado Cash originally applied by the previous administration, a popular crypto mixing tool used by money launderers and accused of helping North Korean hackers hide stolen funds. Then secondly, in a separate Interim Final Rule (36 page PDF) issued by the Financial Crimes Enforcement Network (FinCEN), suspending beneficial ownership reporting requirements for most U.S. registered companies and U.S. citizens.
Tornado Cash Sanctions Lifted
Tornado Cash was placed on the U.S. sanctions list in 2022 after allegations it facilitated more than $7 billion in illicit transactions, including over $455 million connected to the Lazarus Group. The protocol operates autonomously on the Ethereum blockchain and is not controlled by any entity. Legal challenges last November, including a key court ruling in 2024, argued that the Treasury had exceeded it's authority in sanctioning open-source software.
In response, the Treasury officially removed Tornado Cash from its sanctions list, acknowledging the legal and technical landscape in the case but emphasized it would continue to monitor national security risks involving crypto. Open source advocates welcomed the decision while lawmakers and cybersecurity experts warned that the move may open the door to continued misuse of the crypto mixing tool by bad actors.
Corporate Transparency Act Enforcement Suspended
Additionally, the U.S. Treasury’s FinCEN divison rolled back key parts of the Corporate Transparency Act that was passed in 2021 to prevent criminals from hiding behind anonymous shell companies. The original law required most U.S. companies to report who really owns them, and about 32 million businesses were expected to comply but now most U.S. firms and citizens no longer have to report ownership. Only some foreign companies still need to file, and they don't have to name U.S. owners.
See: Memecoins, Regulation, and the SEC’s Changing Strategy
The Treasury says the change will reduce costs for small businesses and is part of a broader push to deregulate. Critics warn that it will weaken efforts to fight money laundering and financial crime because without data, investigations will have a harder time tracking illegal activity hidden behind complex company setups.
Implications and Outlook
These changes are being framed as pro-business and innovation-friendly but one questions how the U.S. will continue to meet international expectations around transparency, financial integrity and compliance? For Canadian fintechs, investors and regulators with cross-border interests, due diligence processes will need to adjust in the absence of ownership data from U.S. firms. In the same vein, regulatory checks and balances towards privacy tools in crypto markets could affect risk assessments, partnerships and compliance frameworks.
See: Overcoming Barriers to Growth in Financial Regulation
As most jurisdictions move to strengthen ownership disclosure and digital asset monitoring, the U.S. is going for a lighter touch (and their policy divergence grows wider). Will these changes support competitiveness or increase exposure to financial abuse? Another policy that Canadian fintechs with cross-border engagements need to follow closely and adjust as required.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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