Unprecedented Sanctions on Tornado Cash Challenged by Blockchain Advocates
The Blockchain Association and DeFi Education Fund have jointly filed an amicus brief challenging the U.S. Treasury Department's unprecedented and unlawful sanctions on Tornado Cash.
The software, which operates automatically on the Ethereum blockchain, was widely recognized as the leading privacy-protecting tool until the Office of Foreign Asset Control (OFAC) imposed sanctions.
The amicus brief emphasizes the importance of Tornado Cash in safeguarding digital asset users’ privacy, highlighting the increasing adoption of digital assets in the U.S.
The organizations argue that while the software can be misused, it primarily serves legitimate and socially valuable purposes, and the sanctions exceed OFAC’s authority, resulting from arbitrary decision-making.
OFAC sanctioned Tornado Cash and seven other entities on November 18, 2021, citing alleged involvement in facilitating ransomware payments. This designation prohibits U.S. individuals from engaging in transactions or providing services related to the protocol based on an executive order targeting malicious cyber activities.
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Coin Center, a cryptocurrency think tank, and Coinbase, a prominent cryptocurrency exchange, have also voiced their concerns about the sanctions. Coinbase supports a group of plaintiffs claiming that Tornado Cash, as software, should not be subject to sanctions. Coin Center argues that Tornado Cash is open-source software with both potential for misuse and legitimate applications, similar to cash or the internet.
The Blockchain Association and DeFi Education Fund are nonprofit organizations dedicated to improving the policy environment for the digital asset economy and promoting blockchain technology and DeFi. They educate policymakers, regulators, courts, and the public about the benefits and nature of these technologies.
The decision to sanction Tornado Cash raises regulatory and constitutional questions with significant implications for the blockchain ecosystem and the digital asset economy. This case could establish a precedent for government regulation of blockchain technology and decentralized finance, underscoring the importance of carefully considering the arguments presented in the amicus brief.