Tornado Cash sanctions called “unprecedented and illegal” by Blockchain Association

by Arthur · June 2, 2023

[gpt3]rewrite

The Blockchain Association and the DeFi Education Fund have filed an amicus brief calling the US Treasury Department’s decision to sanction Tornado Cash “unprecedented and illegal.”

Until OFAC imposed sanctions, Tornado Cash was the most popular privacy protection tool on Ethereum, the world’s second largest digital asset platform. The software is self-executing computer software published on the Ethereum blockchain, and it works automatically without human intervention or assistance.

Blockchain Association Takes On US Treasury Over Tornado Cash Sanction

The filing claims that the decision to sanction Tornado Cash reflects a fundamental misunderstanding of the software and how it works. The protocol was the most popular privacy protection tool on Ethereum until the Office of Foreign Asset Control (OFAC) imposed sanctions.

The amicus brief highlights the importance of Tornado Cash as a tool to protect the privacy of users of digital assets. It claims that Americans are using digital assets more than ever, with 20 percent of American adults owning digital assets and 29 percent planning to buy or trade digital assets.

The card also notes that software such as Tornado Cash can be misused for illegal purposes, but is primarily used for legitimate and socially valuable reasons. The filing further claims that the sanctions exceed OFAC’s statutory authority and are the result of “arbitrary and capricious decision-making.”

OFAC sanctioned the Protocol on November 18, 2021, along with seven other entities, for their alleged involvement in facilitating ransom payments. OFAC designated Tornado Cash as a “Specially Designated National” (SDN), meaning that US persons are generally prohibited from engaging in transactions with or providing services to the Protocol. The sanctions against Tornado Cash were imposed under Executive Order 13694, which targets malicious cyber activities of individuals and entities.

As reported by Bitcoinist, Crypto think tank Coin Center has been one of the most vocal critics of the US Treasury Department’s decision to impose sanctions on Tornado Cash. Coin Center argued that the sanctions against Tornado Cash were wrong and could have far-reaching consequences for the crypto industry.

Furthermore, Coin Center highlighted that Tornado Cash is an open source protocol that allows users to mix Ethereum transactions to protect their privacy. While the platform could be used for illegal purposes, Coin Center argued that the same could be said for many other technologies, including cash and the internet.

Along the same lines, the cryptocurrency exchange Coinbase supported a group of plaintiffs who wanted sanctions imposed by the US government against Tornado Cash to be removed. The plaintiffs, Joseph Van Loon, Tyler Al-meida, Alexandra Fisher, Preston Van Loon, Kevin Vitale and Nate Welch, claim that the government cannot sanction Tornado Cash because it is “only software and therefore not a foreign national or person.”

The Blockchain Association and the DeFi Education Fund are leading non-profit organizations dedicated to improving the policy environment for the digital asset economy and ensuring that blockchain technology innovation can thrive. They work to educate policymakers, regulators, courts and the public about the nature and benefits of blockchain technology and decentralized finance (DeFi).

The decision raises serious regulatory and constitutional questions that have far-reaching effects on the blockchain ecosystem and the digital asset economy. This case could set a precedent for how governments regulate blockchain technology and decentralized finance, making it critical for the court to fully consider the arguments presented in the briefs.