Another Victory for the Crypto Industry! Fifth Circuit Overturns OFAC Sanctions of Tornado Cash Smart Contracts
Another Victory for the Crypto Industry! Fifth Circuit Overturns OFAC Sanctions of Tornado Cash Smart Contracts
The crypto industry has achieved a major milestone: The Fifth Circuit has overturned the Treasury Department’s Office of Foreign Assets Control (OFAC) sanctions against Tornado Cash.
What is Tornado Cash?
Tornado Cash is a decentralized, open-source protocol on the Ethereum blockchain designed to enhance privacy. It allows users to remove the on-chain history of their crypto deposits and withdrawals. Tornado Cash has become a digital lifeline for freedom fighters and privacy advocates around the globe, allowing them to transact without the prying eyes of authoritarian regimes.
OFAC’s Sanctions and Allegations
In August 2022, the OFAC sanctioned Toronado Cash for alleged money laundering. OFAC claimed that the North Korean hacker group Lazarus was using the protocol for illegal activity. Most notably, the $620 million Ronin Bridge hack and the $100 million Harmony Bridge hack benefited from Tornado Cash’s functionality.
The Case Against Sanctions
Various users of Toronado Cash argued against OFAC, stating that its open-source, self-executing software was not sanctionable under the International Emergency Economic Powers Act (IEEPA). Rather, bad actors unfairly targeted the protocol. Furthermore, as a decentralized protocol, Toronado Cash has no central authority, and its developers should not be held responsible for misuse, nor can they prevent it.
The government’s attempt to stifle Tornado Cash with sanctions was not just a misstep; it was an overreach of power, trying to clamp down on technology because they couldn’t control its use.
The Fifth Circuit’s Verdict
After reviewing the case, the Fifth Circuit ruled that OFAC overstepped its authority. The court determined that Tornado Cash’s self-executing smart contracts do not constitute “property” under the IEEPA because they are immutable and cannot be owned or controlled. As such, OFAC’s sanctions on the protocol were deemed unlawful.
The court clarified that while individuals or entities misusing the protocol could be sanctioned, the tool itself cannot be targeted since lawful individuals also use it.
Implications for the Crypto Industry
This ruling is a resounding victory for the innovative spirit that drives the crypto industry, showing that the pursuit of technological advancement will prevail even in the face of regulatory challenges. Let this victory be a rallying cry for all in the crypto community to continue innovating, to keep pushing the limits of what’s possible, and to safeguard our financial privacy against the encroachment of state control.
A Rallying Cry for Decentralization
The victory against Tornado Cash sanctions is more than a legal win; it’s a call to action for the crypto community. It reminds us to keep innovating, to push the boundaries of what’s possible, and to protect the principles of decentralization and privacy that define the blockchain revolution.
When decentralized tech keeps winning
