US Court Overturns Tornado Cash Sanctions: A Win for Crypto Privacy

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The United States Court of Appeals for the Fifth Circuit issued a ruling that the sanctions against crypto mixer Tornado Cash by the US Treasury Department were unlawful. According to the ruling dated November 26, the Department of the Treasury; Office of Foreign Assets Control (OFAC) overstepped its congressional defined authority in the sanctions against smart contracts on Tornado Cash.

Furthermore, the immutable smart contracts at the core of Tornado Cash cannot be owned by anyone and thus are not subject to sanctions on property by the OFAC.

“We hold that Tornado Cash’s immutable smart contracts  (the lines of privacy-enabling software code) are not the “property” of a foreign national or entity, meaning (1) they cannot be blocked under IEEPA, and (2) OFAC overstepped its congressionally defined authority,” the court ruling noted.

Victory for the Crypto Privacy Sector

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

The court ruling on the Tornado Cash sanction is a huge victory for the crypto privacy sector, which was under existential threat. Moreover, the smart contracts used by crypto mixers are open-source codes, that anybody can use irrespective of government sanctions.

“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,” Paul Grewal, the Chief Legal Officer at Coinbase Global noted.

Meanwhile, Tornado Cash protocol developer Alex Pertsev is now pushing for an appeal in the Netherlands after he was found guilty of money laundering charges and was sentenced to 64 months in prison earlier this year.

Market Implication

Following the ruling on Tuesday, the Tornado Cash token rallied over 10x before cooling down on Wednesday during the early Asian market. According to the latest market data, the s cap altcoin, with a fully diluted valuation of about $146 million, had surged around 500 percent in the past 24 hours to trade at about $20.66 at the time of this writing.

The multi-chain altcoin has signaled an imminent rally towards its all-time high of around $436, which was set during the 2021 bull market.