A US appeals court has determined that the US Treasury Department overstepped its authority by sanctioning the cryptocurrency mixer Tornado Cash in 2022. The Treasury accused Tornado Cash of laundering over $7 billion linked to hackers, particularly from North Korea. This ruling favored six users of Tornado Cash who, with help from Coinbase, challenged the sanctions. Critics argue that Tornado Cash’s smart contracts, which anonymize transactions, should not be classified as property under US law, meaning the Treasury’s sanctions may not be valid. While there are concerns about the risks of unregulated technology, Coinbase called this ruling a significant win for cryptocurrency and privacy. The legal situation for Tornado Cash continues, as it also faces scrutiny over money laundering charges.
A recent ruling by a US appeals court has determined that the US Treasury Department overstepped its authority when it imposed sanctions on the cryptocurrency mixer Tornado Cash in 2022. The court’s decision came after six users of Tornado Cash, supported by the cryptocurrency exchange Coinbase, challenged the sanctions, arguing that the Treasury’s actions were unjustified.
The US Treasury had accused Tornado Cash of helping launder more than $7 billion for hackers, including those linked to North Korea. Tornado Cash is a tool designed to make cryptocurrency transactions anonymous by hiding the sources and ownership of digital assets. The sanctions were executed under the International Emergency Economic Powers Act, with claims that Tornado Cash facilitated the laundering of large sums from cybercrimes, particularly the $455 million stolen by the North Korea-based Lazarus Group.
Critics of the sanctions argued that the federal law allows the Treasury to regulate property, but they claimed that Tornado Cash’s smart contracts—automated codes for processing cryptocurrency—do not fit this definition of property. These contracts work independently, providing privacy by mixing users’ funds, and cannot be altered or controlled by any individual or organization.
While some acknowledge the potential risks of unregulated financial technology, they believe it is the responsibility of Congress to revise the laws, not the courts. The unique design of Tornado Cash’s software prevents it from being classified legally as property.
Although the Treasury Department has not yet commented on this ruling, officials from Coinbase hailed it as a significant victory for the cryptocurrency community and personal privacy. They cautioned that blanket sanctions on entire technologies could hinder innovation.
This ruling occurs amid growing legal attention on Tornado Cash, as one of its developers received a prison sentence in the Netherlands for money laundering, and some of its founders face charges in the US for money laundering and violations of sanctions.
Tags: US Appeals Court, Tornado Cash, Cryptocurrency, US Treasury, Sanctions, Coinbase, Legal Ruling, Digital Privacy
What happened with Tornado Cash and US sanctions?
A court has ruled that the US sanctions against Tornado Cash, a cryptocurrency mixer, are not valid.
Why was Tornado Cash sanctioned in the first place?
Tornado Cash was sanctioned because the US government believed it helped criminals by hiding their transactions.
What does this court ruling mean for Tornado Cash?
This ruling means that Tornado Cash may operate without the restrictions imposed by the US sanctions.
Can people use Tornado Cash now?
Yes, if the sanctions are lifted following the court decision, people can use Tornado Cash again without legal issues.
What could happen next regarding this case?
The US government may choose to appeal the court’s decision, or they might need to rethink their approach to regulating cryptocurrency mixers.
