US Court Overturns Sanctions on Crypto Mixer Tornado Cash

• A federal court ruled that the Treasury’s sanctions against Tornado Cash were unlawful.
• Coinbase’s chief legal officer, Paul Grewal, acknowledges it as a historic win for crypto.
• Jake Chervinsky calls Tornado Cash’s win a stunning victory for crypto and decentralization.

A US federal court has ruled that the Treasury Department’s sanctions against the crypto mixer Tornado Cash are unlawful, marking a significant win for the crypto industry. Industry experts like Paul Grewal and Jake Chervinsky celebrated the ruling, calling it a “historic win for crypto.”

On November 27th, Coinbase’s Chief Legal Officer, Paul Grewal, posted on X, revealing the Fifth Circuit Appeals Court’s decision on the Treasury’s sanctions against Tornado Cash’s immutable smart contracts. In August 2022, the Treasury Department’s Office of Foreign Assets Control (OFAC) designated Tornado Cash as a sanctioned entity, prohibiting firms and individuals from using the platform. The Treasury also alleged that Tornado Cash facilitated North Korea’s nuclear weapons program.

However, the court overturned this action, finding that the department overstepped its bounds in sanctioning the platform. This decision reversed a lower court’s ruling, stating that the department lacked authority even over the broader definition of “any property.” The three-judge panel explained that the platform’s smart contracts were not subject to ownership and did not meet the traditional definition of contracts or services.

The court determined that, under the International Emergency Economic Powers Act (IEEPA), Tornado Cash’s smart contracts did not qualify as property. Passed in 1977, the IEEPA grants the US President the power to control and restrict specific financial transactions during national emergencies.

“Privacy wins,” Grewal stated in response to this significant ruling. He emphasized his favorite part of the ruling, which challenged regulatory agencies’ tendency to exceed their authority. The court asserted that legislation falls exclusively under Congress’s domain, adding that the Treasury Department cannot engage in judicial lawmaking.

Meanwhile, Jake Chervinsky, a notable crypto voice, called the court’s decision a “stunning victory for crypto.” He also highlighted the court’s statements regarding the Treasury’s unlawful sanctions, stating, “Decentralization wins.”