Tornado Cash Sanctions Overturned; TORN Token Spikes 400%
A U.S. federal appeals court has struck down Treasury Department sanctions against Tornado Cash. This popular cryptocurrency mixing service enables users to anonymize their cryptocurrency transactions through smart contracts.
The decision by the Fifth Circuit Court of Appeals marks a major victory for proponents of decentralized technology and privacy advocates. At the same time, it has reignited the debate over how to regulate the use of blockchain tools in connection with criminal activity.
Treasury Sanctions on Tornado Cash fell over
U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) Tornado Cash approved in 2022. According to the agency, the platform is a key tool for illegal actors, including those in North Korea. Lazarus Grouplaundering stolen funds.
However, the court ruled that OFAC exceeded its authority. It emphasized that the immutable smart contract underpinning Tornado Cash cannot be considered property under the International Emergency Economic Powers Act (IEEPA).
The Court of Appeal’s decision depends on Nature of Tornado Cash Smart Contract. These are autonomous lines of code designed to run without human intervention.
These contracts are deployed on the Ethereum blockchain, immutable and accessible to anyone. The court held that such contracts did not meet the legal definition of “property” because they could not be owned, controlled or restricted.
“The immutable smart contracts at issue are not property because they cannot be owned,” the court wrote.
The court further noted that while sanctions may prevent certain individuals from using Tornado Cash, the decentralized nature of the technology ensures that no one, including North Korean hackers, can completely block access to the technology. Coinbase Chief Legal Officer Paul Grewal welcomed the ruling.
“This is a historic victory for crypto and everyone who cares about defending freedom… These smart contracts must now be removed from the sanctions list and Americans will once again be allowed to use this privacy protection protocol. In other words , the government’s overreach is indefensible…No one wants criminals to use encryption protocols, but blocking open source technology solely because a small percentage of users are bad actors is not what Congress authorized these sanctions to do. Extended beyond recognition, the 5th Circuit agreed. ” Grewal. wrote On X (formerly Twitter),
Grewal also emphasized the importance of distinguishing between tools and their misuse. It is worth noting that Coin Libraryis a leading cryptocurrency exchange that is Suing the government over sanctions.
Wider implications for cryptocurrency regulation
The ruling exposed the challenges of applying existing legal frameworks to decentralized technologies. Cryptocurrency mixing services like Tornado Cash occupy a legal gray area, prompting Calls for U.S. lawmakers to review.
They are neither traditional financial (TradFi) institutions nor entities that can be controlled by a central authority. Critics of the ruling argue that it could encourage bad actors to further exploit blockchain technology.
“If you think Tornado Cash has been used by good people for valuable purposes, then make your case… If privacy protects good people, that’s good, if it protects bad people, that’s bad. Tornado Cash protects the vast majority of Most people are doing bad things,” one user on joke.
Some lawmakers had previously pressured the Treasury Department to impose stricter measures on cryptocurrency mixers. In 2022, MPs emphasized Concerns about its role in promoting money laundering and financing of terrorism. The bipartisan effort aims to ensure that tools like Tornado Cash, which are often associated with criminal networks, are subject to regulatory scrutiny.
However, privacy advocates argue that targeting tools rather than actors Undermining decentralization and privacy principles. Bill Hughes, an attorney for ConsenSys, applauded the court’s nuanced understanding of the issue but highlighted a key issue. He warned that regulatory risks remained.
“That doesn’t mean the rest of Tornado Cash is also outside the scope of Treasury/OFAC. The question is about smart contracts that don’t manage the keys,” Hughes wrote.
This means that the court’s decision does not protect Tornado Cash from other legal challenges, especially those involving its founder. AsBeInCrypto reportthey face charges of assisting money laundering. Additionally, the broader debate over how decentralized technology should be regulated remains unresolved.
However, according to the ruling, Tornado Cash’s native token, tearAs of this writing, shares are up nearly 400%, trading at $17.63.
The surge reflects investor optimism about the protocol’s potential revival and its impact on decentralized finance (Decentralized Finance)project.
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