The filing claimsย that the Treasury does not possess the necessary jurisdiction to ban Tornado Cash and its associated transactions.
In a recent filing on May 24, 6 individuals presented four key arguments to overturn theย Unitedย States Treasuryโs decision to impose sanctions on ourย trending cryptocurrency mixer, Tornado Cash.
The plaintiffs argue that the case is not about granting special regulations to new technology but rather about Government overreach and a violation of 1st Amendment rights.
The arguments were summarized by Coinbaseโs chief legal officer, Paul Grewal, in a Twitter thread, where he contended that the Government is tryingย to employ a property sanctions statute to ban open-source software, which contradicts the original intentions of the law.
Cryptocurrency exchange Coinbaseย Cryptoย exchange has expressed support for the lawsuit against the Unitedย States Department of Treasury, atย theย beginning filed on September 8, 2022.
The plaintiffs involved in the filing include Joseph Van Loon, Tyler Almeida, Alexander Fisher, Preston Van Loon, Kevin Vitale, and Nate Welch, most of whom have had prior interactions with Tornado Cash.
Questioning the Treasuryโs categorization of Tornado Cash
The plaintiffsโ 1st argument questions the Treasuryโs effortย to categorize Tornado Cash as a foreign โnationalโ to justify its actions.
The plaintiffs highlight that the Treasuryโs definition of Tornado Cash includes all holders of the TORN cryptoย token, regardlessย of any shared purpose. Consequently, the plaintiffs argue that Tornado Cash cannot be classified as an unincorporated association accordingย to the Treasuryโs own criteria.
The Second argument revolves around seeingย as open-source smart contracts, which provide functionality to Tornado Cash. The plaintiffs claimย that these smart contracts cannot be deemed as property since any property is traditionally defined as something that can be owned.
Even if the smart contracts were considered property, the third argument made by the plaintiffs contests the absence of any โinterestโ held by a Tornado Cash entity in these contracts. Consequently, reportsย by the plaintiffs, the Treasury lacks the authority to impose sanctions.
The final argument centers on the violation of the 1st Amendment. The plaintiffs argue that even if the Treasury possesses the authority to sanction Tornado Cash, such an action infringes on the right to free speech. They contend that the Treasury cannot justify this imposition by suggesting that Tornado Cash users should exercise their free speech rights elsewhere.
Upholding privacy in the cryptocurrency space
The Unitedย States Treasury atย theย beginning imposed sanctions on plentyย of addresses associated with Tornado Cash on August 8, 2022, merely a 30ย days after the open-sourcing of the user interface code.
Tornado Cash, a decentralized Ethereumย (ETH) mixer, offers users enhanced transactional privacy by obscuring the origin of their funds. The regulatory concerns surrounding privacy-focused tools have led to sanctions on such services.
Coinbaseย Cryptoย exchange intendsย to address these concerns through its motion arguments in support of lifting sanctions on Tornado Cash.
The outcome of Coinbaseโs motion to lift the sanctions on Tornado Cash could have far-reaching implications for privacy-enhancing tools and innovation in the digitalย currency industry. It may setย up a precedent for treating similar privacy-focused projects and shape the regulatory landscape concerning digitalย currency privacy.
Inย addition, this decision could influence how exchanges, regulatoryย authorities, and users perceive and engage with privacy tools moving forward.
