The primary crypto industry lobbying entity in Washington has thrown its weight behind the latest endeavour by six plaintiffs to reverse the US government’s sanctions on Tornado Cash. The Blockchain Association, based in Washington DC, filed a comprehensive 39-page brief in a federal appellate court in Texas.
The crux of their argument was that the US government made a critical error in characterizing Tornado Cash as a tool rooted in software code rather than an entity or individual.
Decentralized Finance Warriors Rise: The Resurgence of Tornado Cash’s Legal Battle
In support of this claim, the Association’s legal representatives from the well-connected law firm Jones Day in Washington underscored the key point that Tornado Cash operates autonomously, devoid of human intervention. It is similar to the nature of the internet or any standard tool. While acknowledging the potential for misuse in illicit activities, the legal team stressed that the primary purpose of Tornado Cash is for legitimate and socially valuable reasons.
Despite the challenging odds of success, a group of DeFi (Decentralized Finance) experts, spearheaded by Preston Van Loon, a core developer of Ethereum, recently sought to resurrect their lawsuit against Tornado Cash in a Texas appeals court. Their initial case was dismissed in August by a lower court due to a perceived lack of substantial evidence. Notably, the crypto industry has rallied around this cause. With Coinbase submitting its own supportive brief, the Blockchain Association has added its weight to the effort.
The Code’s Defense: Upholding Tornado Cash Amidst Crypto Regulatory Storm
At the core of the argument lies the concern that the persistence of sanctions on Tornado Cash could substantially weaken the broader crypto-asset industry, hindering the lawful use of the protocol. Critics fear that this could also grant the Office of Foreign Assets Control (OFAC) excessive power to target lines of code that are not owned by any individual or entity. Tornado Cash provides a decentralized protocol designed to obscure the transaction history of cryptocurrencies. Thereby promoting enhanced privacy on public blockchains.
The US Treasury Department’s Office of Foreign Assets Control imposed sanctions on Tornado Cash in August 2022, alleging its involvement in money laundering activities conducted by a North Korean hacker group.
‘A hammer is a tool, a car is a tool, indeed the internet itself could be considered a tool.’— Kristin Smith, Blockchain Association
Blockchain Association
The Blockchain Association argues that the sanctioning of the protocol infringes upon the First Amendment, characterizing it as a neutral tool akin to commonplace items such as a hammer, car, or the internet.
Coin Base’s Stand and Blockchain Association’s Anthem
Furthermore, the lobbying group, which boasts representation from industry behemoths like Coinbase, Kraken, Circle, eToro, Grayscale, and Polygon Labs, contends that conventional practice would dictate the sanctioning of individuals engaged in illicit activities rather than neutral tools.
Coinbase, a leading crypto exchange, independently voiced support for Tornado Cash, criticizing the Treasury’s action as an overstretch of its authority beyond recognition.
“Congress gave Treasury the power to prohibit transactions involving certain ‘property’ in which a foreign ‘national’ or sanctioned ‘person’ has an interest,” Coinbase Chief Legal Officer Paul Grewal posted on X last week.
Coin Center’s Echo: The Ongoing Legal Symphony
In a parallel effort, Coin Center, an additional advocacy group, attempted to reverse OFAC’s sanctions on Tornado Cash. However, their lawsuit was dismissed at the end of October. This marks another development in the ongoing legal battle surrounding this crypto protocol.
