4 Key Arguments Against US Treasury’s Tornado Cash Ban

4 Key Arguments Against US Treasury’s Tornado Cash Ban

Individuals fighting against the U.S. Department of Treasury’s decision to sanction Ethereum mixing provider Tornado Cash argue that the government is attempting to ban open-source software through a property sanctions statute in a case supported by Coinbase’s chief legal officer.

Individuals trying to reverse the decision to penalize Ethereum (ETH) mixing provider Tornado Cash detailed the case’s key  points in a new court filing in favor of the continuing legal action against the United States Department of Treasury. They were supported by Coinbase’s chief legal officer Paul Grewal, who tweeted in a thread about it.

The plaintiffs make 4 points here, but they all come down to the same complication. The Government. is attempting to ban the use of an open-source software using a property sanctions statute. Because this isn’t what the law was meant to do, they can’t make the law fit this case. 2/7

About Tornado Cash

Tornado Cash is a privacy-focused service that enables anyone to conduct transactions on the Ethereum (ETH) blockchain tech anonymously by blending users’ transactions to make it challenging to pinpoint specific senders or recipients.

In August 2022, the Office of Foreign Assets Control (OFAC) of the Department of the Treasury controversially put the mixer on its Specially Designated Nationals and Blocked Individuals (SDC) list, sanitizing Ethereum (ETH) wallets linked to the service.

In an official statement, United States officials assert that since its launch in 2019, Tornado Cash has assisted in the laundering of greater than $7 Billion dollars. They base their claim on North Korean attackers and other nefarious individuals.

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Shortly after, a complaint was launched against the Treasury, supported by Coinbase Crypto exchange and likewise naming Treasury Secretary Janet Yellen and OFAC Director Andrea Gacki. The case challenges the Treasury’s sanctions on Tornado Cash on four different grounds.

The plaintiffs contend that, rather than carving out special regulations for new technology, the action is about holding the Treasury

“to the fundamental requirements of the International Emergency Economic Powers Act (IEEPA) and the Free Speech Clause of the 1st Amendment to the  United States Constitution”

The Government is attempting to outlaw open-source software by invoking a property sanctions act, Coinbase’s chief legal officer Paul Grewal stated in a summary of the arguments issued on Twitter.

Grewal contends that “[the Government] can not make the law fit this case because this is not what the law was meant to do.”

United States Government Persecution of Crypto

As we previously informed, the United States Government has been taking legal action against digital currency corporations since the latter half of 2022 and the beginning of in the year. Through the CFTC and the SEC, it has asserted that digital currency crypto tokens are securities and has openly sued plenty of cryptocurrency enterprises and major exchanges. The United States Government is allegedly forcing innovation in cryptocurrency out of the nation, reports by plenty of opponents who have spoken out against these strategies. In reality, corporations have started seeing as relocating to Asia and Europe in search of more favorable cryptocurrency business climates than the United States.

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Labeled “Operation Choke Point 2.0”, these actions cast a very unfavorable light on the government’s attack on Tornado Cash users, suggesting it had the same motivations, originating from a desperate fear of being unable to control the cryptocurrency space.

Plaintiffs’ Arguments

First, the plaintiffs assert that despite the fact that “that is not an unincorporated association under the Department’s own test,” the Treasury defined “Tornado Cash” to encompass anybody who owns a digital crypto token TORN.

Grewal responded by stating that “sanctions depend on assumption that everyone who just so happens to own a digital crypto token (TORN) is a member of a legally recognized business named ‘Tornado Cash.’ That is erroneous in terms of truth and innovative as a legal doctrine.

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The Department has not adequately addressed how the open-source, immutable smart contracts specified in the designation—which no one can own or control—are sanctionable “property,” reports by the Second argument.

The legal definition of property, reports by Grewal, is something that can be owned. Nonetheless, no one can own, manage, or alter the open-source, irreversible smart contracts at the core of this privacy software.

The third issue is in doing so that nobody has a “property interest” in these smart contracts, not even the designers, developers, or holders of TORN crypto tokens, reports by Grewal.

The Department’s search for such an interest is limited to asserts that the alleged Tornado Cash organization has interests in things other than immutable smart contracts or that it would stand to win from greater adoption of immutable smart contracts. Reports by IEEPA, neither of them constitutes a “interest” in any property contained in the immutable smart contracts.

Violation of the 1st Amendment

The plaintiffs’ assert that the 1st Amendment, which broadly protects the right to free expression, has been violated is discussed in the fourth argument.

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Reports by the 1st Amendment, sanctioning Tornado Cash interfered with free expression. “Plaintiffs used the software to guard their privacy while engaging in important donations and other core 1A speech,” the statement reads.

The Government’s answer is “worrisome,” reports by Coinbase’s chief legal officer, because it essentially advises individuals to “go speak somewhere else.”

On the other hand, that is weaker than the 1A. The Government cannot just instruct law-abiding citizens to enjoy their rights in a location with far less personal safeguards, continued Grewal. He tweeted:

Argument #4: Sanctioning Tornado Cash unconstitutionally burdened speech under the 1st Amendment. Plaintiffs used the software to guard their privacy while engaging in core 1A speech like important donations. The Govt’s answer is worrisome. Basically, it is “go speak somewhere else.” On the other hand, the 1A is stronger than that. The Government. can’t simply tell law-abiding Americans to go exercise their freedom in some other venue with far fewer personal protections. 6/7

The legal dispute occurs as the Dutch court on Wednesday approved Alexey Pertsev’s request to interrogate Chainalysis, a blockchain tech analytics company, in relation to his current money laundering prosecution. Pertsev is the inventor of Tornado Cash.

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34 percent of the cash submitted to Tornado Cash came from illegal sources, reports by Chainalysis‘ January report, with the bulk of activity concentrating on two types of cybercrime: cryptocurrency hacks and scams.

As a result of the part the company’s data played in the developer’s arrest in August of a year ago, Pertsev’s attorneys now want to interrogate the business.


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