US court overturns sanctions imposed on Tornado Cash, and the price of the cryptocurrency token rises by 140%
The US District Court for the Western District of Texas overturned sanctions imposed on decentralized cryptocurrency mixing platform Tornado Cash, which was previously blacklisted by the US Treasury Department’s Office of Foreign Assets Control (OFAC) in 2022. The sanctions were imposed over allegations that… Tornado Cash was used by North Korea’s Lazarus Group to launder stolen cryptocurrencies. Following the ruling, the price of Tornado Cash’s original token, TORN, rose more than 140%, from $9.5 to more than $23.
The central issue in the case was Tornado Cash’s underlying technology, which consists of smart contracts that cannot be changed or controlled by any individual or entity. The court ruled that these contracts were not property under the International Emergency Economic Powers Act (IEEPA), the law used by OFAC to impose sanctions. Because smart contracts are immutable and decentralized, they are considered “non-ownerable” and therefore cannot be subject to the same restrictions imposed on people or companies.
The court explained that the government’s actions exceeded the limits of its authority by attempting to regulate decentralized technologies. The ruling stressed that Treasury does not have the authority to sanction technologies like Tornado Cash under IEEPA, especially when these technologies operate autonomously without human intervention.
While the court acknowledged the Treasury’s broad powers, it rejected the argument that Tornado Cash constituted a sanctionable service, noting that the operation of the platform was entirely governed by code, not people. Tornado Cash’s defense argued that the Treasury Department had effectively created new laws without congressional approval, a position with which the court agreed. This ruling has major implications for the future of blockchain technologies and how they are regulated.
The decision was celebrated by privacy advocates, who viewed it as a victory for decentralization and financial privacy. The ruling also positively impacted other privacy-focused cryptocurrencies, such as Monero and Zcash, whose prices rose in response to the decision. Privacy-focused platforms in the Web3 space applauded the court’s decision, stressing the importance of protecting user privacy rights in the rapidly evolving digital economy.
While this ruling represents a victory for Tornado Cash and its supporters, there are indications that the US government may seek to appeal the decision, which could result in the case escalating to the Supreme Court. However, some in the cryptocurrency community, including Coinbase’s chief legal officer, urged the government to accept the court’s ruling, highlighting the importance of protecting personal privacy in the digital age. This case highlights the challenges authorities face in regulating decentralized technologies and raises important questions about the future of cryptocurrency regulation.
