US Treasury Removes Tornado. cash from Sanctions List: A Legal Victory or a Loophole?
In a recent turn of events, the Office of Foreign Assets Control (OFAC) of the United States Treasury Department has removed Tornado. cash, a popular decentralized finance (DeFi) mixer, from its sanctions list. This decision came after a New York District Court ruled that the sanctions imposed on the protocol in August 2022 were unlawful.
Background
Tornado. cash is a decentralized privacy solution for Ethereum transactions, allowing users to obscure the origin and destination of their funds. In August 2022, OFAC added Tornado. cash to its Specially Designated Nationals and Blocked Persons List (SDN List), citing its alleged use in money laundering and other illicit activities. This move marked the first time a decentralized protocol had been added to the SDN List.
Coinbase’s Legal Challenge
Coinbase, a leading cryptocurrency exchange, quickly responded to the sanctions by filing a lawsuit against the US Treasury Department, arguing that the sanctions were unlawful and violated Tornado. cash’s users’ constitutional rights. Coinbase, which had previously integrated Tornado. cash into its platform, also argued that the sanctions would harm its business and its users.
The Court Ruling
On October 14, 2022, Judge Loretta Preska of the Southern District of New York granted Coinbase’s motion for a preliminary injunction, ordering the Treasury Department to remove Tornado. cash from the SDN List. The judge ruled that the sanctions were overly broad and violated Coinbase’s due process rights.
Reactions and Criticism
The removal of Tornado. cash from the sanctions list was met with mixed reactions. Some in the cryptocurrency community celebrated the victory as a win for decentralization and privacy. However, others, including Coinbase’s legal chief, Paul Grewal, criticized the US Treasury for trying to avoid the final judgment in the ongoing lawsuit.
- “The Treasury Department’s decision to remove Tornado. cash from the SDN List before the court has ruled on the merits of Coinbase’s claims is deeply concerning,” Grewal tweeted. “It’s a clear attempt to manipulate the outcome of the litigation and undermine the rule of law.”
Implications for Users
The removal of Tornado. cash from the sanctions list means that users can once again use the privacy solution for their Ethereum transactions without fear of violating US sanctions. However, it is important to note that using Tornado. cash or any other privacy solution for illicit activities remains illegal.
Implications for the World
The removal of Tornado. cash from the sanctions list could have significant implications for the broader cryptocurrency ecosystem. It sets a precedent for how decentralized technologies are regulated and could impact the US Treasury’s approach to other decentralized projects. It also highlights the need for clearer regulations and guidelines for decentralized technologies.
Conclusion
The US Treasury’s decision to remove Tornado. cash from the sanctions list after a court ruling is a complex issue with far-reaching implications. While some view it as a victory for decentralization and privacy, others see it as an attempt to manipulate the outcome of the ongoing lawsuit. As the cryptocurrency ecosystem continues to evolve, it is essential that regulations keep pace and are clear and consistent.
Regardless of one’s perspective, it is clear that this issue is far from over. The lawsuit between Coinbase and the US Treasury Department is ongoing, and the final judgment will provide valuable insights into how decentralized technologies are regulated and the role of privacy in the cryptocurrency ecosystem.
