As a seasoned analyst with a decade of experience navigating the tumultuous waters of the crypto market, I can confidently say that this ruling by the Federal Appeals Court is a significant milestone for the blockchain community. The fact that code itself cannot be sanctioned opens up new avenues for innovation and privacy in an industry that has long been grappling with regulatory uncertainties.
On November 26th, the appeals court overturned the U.S. Treasury Department’s penalties imposed on Tornado Cash, making this decision in a court located in New Orleans.
The three-judge group concluded that the Treasury exceeded its legal bounds, as they found it inappropriate for them to impose sanctions directly on the software instead of targeting particular people or organizations involved with it.
In simpler terms, the court determined that the Tornado Cash program’s coding structure doesn’t fit under the definition of “asset” subject to sanctions. Coinbase backed this argument in the legal dispute, advocating against the indiscriminate restriction of open-source programming.
Can’t Sanction Code
Judge Don Willett stated that the U.S. government’s worries over foreign entities using cryptocurrency mixers for money laundering are indeed valid concerns. Yet, as per Bloomberg’s report, federal law grants the Department of the Treasury limited authority to intervene on property matters, not directly against crypto mixers.
Willett stated, “It’s possible that Congress may revise a law passed during the Carter Administration to address contemporary technologies such as crypto-blending applications.
In other words, it is currently established that the unalterable codes of Tornado Cash do not belong to any foreign individual or organization, thus they cannot be restricted.
In my role as an analyst, I can share that back in 2022, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) imposed sanctions on a cryptocurrency mixer known as Tornado Cash. The reason for this action was their allegation that Tornado Cash had been utilized to wash over $7 billion in digital assets, with approximately $455 million of these funds being traced back to hacking collectives linked to North Korea.
Hayden Adams, founder of Uniswap, marveled at the remarkable success of cryptocurrency in federal court cases,” or simply, “Cryptocurrency’s impressive performance in federal courts left Hayden Adams astonished.
Simultaneously, Coinbase’s Chief Legal Officer, Paul Grewal, declared “privacy prevails,” followed by stating this as a significant victory for cryptocurrency and everyone who values freedom and privacy.
“The smart contracts that were previously on the sanctions list are now being taken off, enabling US individuals to utilize this privacy-focused system once more. In simpler terms, the excessive reach of the government in this instance has been counteracted.
“No one wants criminals to use crypto protocols, but blocking open source technology entirely because a small portion of users are bad actors is not what Congress authorized,” he added.
Privacy wins. Today the Fifth Circuit held that @USTreasury’s sanctions against Tornado Cash smart contracts are unlawful. This is a historic win for crypto and all who cares about defending liberty. @coinbase is proud to have helped lead this important challenge. 1/6
— paulgrewal.eth (@iampaulgrewal) November 26, 2024
TORN Price Surges
In response to the verdict, the value of Tornado Cash’s native token, TORN, surged over 850%, jumping from approximately $3.60 to peak at around $35 during early Asian trading hours.
Currently, TORN has pulled back to roughly $18, a figure that represents an increase of over 400% in the last 24 hours when this text was penned.
Despite a significant drop, the value of the cryptocurrency mixer token is still 96% lower than its peak in February 2021, which stood at $436, as reported by Coingecko.
The price of Tornado Cash’s $TORN token surged by up to 700% following a U.S. court decision declaring the sanctions imposed on the Tornado Cash cryptocurrency tumbler as illegal.
— CoinGecko (@coingecko) November 27, 2024
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2024-11-27 12:08