In a bid to reverse sanctions against Ethereumโs privacy service, Tornado Cash, plaintiffs question the Unitedย States Department of Treasuryโs interpretation of property rights in smart contracts and the appย of the 1st amendmentโs free speech clause.
In a fresh legal development, the Unitedย States Department of Treasury is confronted with a lawsuit pertaining to sanctions levied against ethereum mixing service, Tornado Cash.
The plaintiffs argue that the case concentratesย on ensuring the Treasuryโs adherence to fundamental principles of the International Emergency Economic Powers Act (IEEPA) and the Free Speech Clause of the 1st Amendment, rather than devising unique regulations for emerging technologies.
Paul Grewal, Coinbaseโs Chief Legal Officer, offered a succinct summary of these arguments onย Twitterย platform, pointing out a core issue: the governmentโs effortย to prohibit open-source software using property sanctions legislation.
Tornado Cash, a privacy-centric service on the ethereum blockchainย tech, provides anonymity to its users by obfuscating individual transactions. Nonetheless, in 2022, the Treasuryโs Office of Foreign Assets Control (OFAC) added the service to its Specially Designated Nationals and Blocked Individuals (SDC) list, thereby sanctioning Ethereumย (ETH) wallets associated with Tornado Cash.
Unitedย States regulatoryย authorities claimย that Tornado Cash has facilitated the laundering of over $7 Billion since its launch in 2019, with malicious actors, including North Korean attackers, allegedly benefiting from this service. This prompted a swift lawsuit, supported by Coinbaseย Cryptoย exchange, contesting the sanctions imposed on Tornado Cash.
The legal battle centers on four key points. First, the plaintiffs challenge the Treasuryโs assertion that any holder of TORN, Tornado Cashโs digital cryptoย token, is automatically deemed part of the โTornado Cashโ entity. Grewal commented on this point, stating that the claim lacks both legal and factual credibility.
The Second point of contention revolves around the Treasuryโs inability to clarify how the immutable, open-source smart contracts mentioned in the designation qualify as โproperty,โ seeingย as they cannot be owned, controlled, or altered.
This leads to the third point of contention, as Grewal elucidated, that neither the creators, developers, nor owners of TORN cryptoย tokens hold a โproperty interestโ in these immutable smart contracts.
The plaintiffsโ filing describes, โIn attemptingย to identify such an interest, the Department solely relies on assumptions that the alleged Tornado Cash entity has stakes in something apart from the immutable smart contracts or would potentially profit from increased utilization of the immutable smart contracts.
Nonetheless, neither constitutes an โinterestโ in property in the immutable smart contracts, as mandated by the IEEPA.โ
The outcome of this lawsuit may set a critical precedent, with implications not only for the rapidly growing industry of digitalย currency but likewise for future Government regulation in the sphere of digital technology.
