Court Rules Treasury Overstepped in Tornado Cash Sanctions

A U.S. Appeals Court rules OFAC exceeded its authority in sanctioning Tornado Cash, sparking debates on decentralized technology regulation.

Landmark Ruling on Crypto Sanctions

A federal appeals court reversed the Treasury Department's sanctions on Tornado Cash, a privacy-focused crypto mixer. The court declared that Tornado Cash’s immutable smart contracts could not be classified as “property,” making them ineligible for sanctions under the International Emergency Economic Powers Act (IEEPA). This decision overturns a prior district court ruling.

Impact on Tornado Cash and Governance Token

The ruling invalidates restrictions imposed by OFAC, which had linked Tornado Cash to illicit activities, including ties to North Korea. Tornado Cash’s governance token, TORN, responded to the news by skyrocketing 870%, reaching nearly $35 before stabilizing around $16.7. The lawsuit, filed by Coinbase-backed plaintiffs, argued that the decentralized nature of Tornado Cash meant it was not an entity but merely a collection of smart contracts. The appeals court acknowledged that the platform remains accessible to anyone with an internet connection, further supporting its stance.

Implications for Crypto Regulation

Industry leaders celebrated the verdict as a victory for decentralized technology and individual privacy. Coinbase’s Chief Legal Officer, Paul Grewal, called it a “historic win.” Experts believe the decision could set a precedent, challenging how decentralized protocols are regulated and potentially influencing the broader regulatory landscape.