In a significant legal development, the United States Court of Appeals for the Fifth Circuit has ruled against the US Treasury Department‘s sanctions on the crypto mixer Tornado Cash. The court’s decision, released on November 26, declared that the Office of Foreign Assets Control (OFAC) had overstepped its congressionally defined authority by sanctioning the smart contracts associated with Tornado Cash.
This ruling highlights the limitations of regulatory reach concerning blockchain technology. The immutable smart contracts at the heart of Tornado Cash are decentralized and cannot be owned by any single entity, thus falling outside the purview of OFAC’s property-based sanctions.
Victory for the Crypto Privacy Sector
The decision has been hailed as a monumental win for the crypto privacy sector, which has faced increasing scrutiny and regulatory challenges. Prominent voices in the crypto community, including Paul Grewal, Chief Legal Officer at Coinbase Global, have expressed their support for the court’s findings. Grewal emphasized that while preventing criminal use of crypto technology is crucial, indiscriminately blocking open-source technology is not within Congress’s mandate.
Meanwhile, in a related development, Tornado Cash protocol developer Alex Pertsev, who was previously convicted of money laundering in the Netherlands, is seeking an appeal following his 64-month prison sentence.
Market Implication
The market reacted swiftly to the court’s ruling, with the Tornado Cash token experiencing a significant surge. Initially rallying over tenfold, the token’s value eventually stabilized, reflecting a 500 percent increase in the last 24 hours. At the time of this report, the token was trading at approximately $20.66, signaling potential bullish momentum towards its all-time high of $436 set during the 2021 crypto boom.
FAQs
Why were Tornado Cash sanctions ruled unlawful?
The Fifth Circuit Court determined that the OFAC exceeded its authority as Tornado Cash’s immutable smart contracts do not constitute “property” under U.S. law.
How does the Tornado Cash ruling affect crypto privacy?
This ruling strengthens the protection of open-source crypto protocols, upholding privacy rights and curbing excessive government intervention in decentralized technologies.
Is it illegal to use Tornado Cash?
No, using Tornado Cash is not illegal. The Fifth Circuit ruling safeguards its open-source smart contracts, affirming that they cannot be owned or sanctioned.
