The US Court of Appeals for the Fifth Circuit has issued a significant ruling in the case between the Treasury Department and privacy platform Tornado Cash.
The court found that sanctions imposed by the Treasury Department's Office of Foreign Assets Control (OFAC) against immutable smart contracts deployed by the Tornado Cash platform were arbitrary, noting that the agency exceeded its authority.
Bill Hughes, a lawyer for ConsenSys, explained on X that this ruling represents a victory for the privacy rights of cryptocurrency users, determining that regardless of the OFAC designation of Tornado Cash, immutable smart contracts can continue to operate.
The district court argued that Tornado Cash immutable smart contracts are not “property” and therefore cannot be sanctioned under the International Emergency Economic Powers Act (IEEPA). “…As a result, no one can “opt out” anyone from using Tornado Cash smart contracts,” said Hughes, celebrating with the crypto community the new court victory.
A victory for privacy and freedom in the crypto space
The appeals court ruling represents a significant victory for privacy and for the freedom of open source innovation in the cryptocurrency and blockchain space. Experts such as Hughes have commented that this decision sets an important precedent by determining that immutable smart contracts cannot be considered property and are therefore not subject to sanctions. This determination reinforces the idea that The code cannot be regulated in the same way as traditional entities.
The crypto community has welcomed this ruling, as it protects users’ privacy and freedom and promotes technological innovation. Smart contracts are central to many decentralized applications (dApps) on the blockchain, and this ruling ensures that these technologies can continue to develop without the threat of unfair penalties. Furthermore, the ruling highlights the importance of regulation based on the state of the art and not on broad, outdated interpretations of existing laws.
Paul Grewal, Coinbase’s chief legal officer, also boasted about the crypto space’s recent court victory. Grewal, who contributed to the Tornado Cash vs. Treasury case, argued that cryptocurrency privacy has won and that this landmark victory highlights the importance of advocating for clear and fair rules that foster innovation in the United States and abroad.
Also, Uniswap founder Hayden Adams, said in relation to the recent court ruling, highlighting that it is A victory for immutable smart contracts on the Treasury Department.
While this court ruling does not free the entire Tornado Cash platform from the sanctions imposed by the federal department, it does allow immutable smart contracts to be removed from the OFAC sanctions list and American users to use them again without fear of retaliation.
Commenting on the ruling, Grewal stressed that while it is true that no one wants criminals to use crypto protocols for their illicit activities, “blocking open source technology altogether because a small portion of users are bad actors” was not the solution.
What happened to Tornado Cash?
Tornado Cash is a cryptocurrency mixer platform that uses smart contracts to provide privacy to Ethereum users. The platform allows users to mix their cryptocurrencies, thereby hiding the origin and destination of transactions. However, in August 2022, the platform was sanctioned by the OFAC, alleging that it had been used by malicious actors, including groups linked to North Korea, to launder illicit funds.
OFAC argued that Tornado Cash was more than just software, as it involved the involvement of its founders, developers, and a decentralized autonomous organization (DAO) in the governance of the platform. However, the appeals court dismantled these allegations, pointing out that Tornado Cash’s immutable smart contracts are neither property nor traditional contracts or services. The court emphasized that these contracts remain accessible to “anyone with an internet connection,” meaning that the sanctions fail to achieve their goal of blocking access to the platform.
The impact on the price of the TORN token
Following the news of the favorable ruling for Tornado Cash, the price of its native token TORN, rose significantly. According to CoinMarketCap, TORN price has increased by around 480% in the last 24 hours, trading at around $18 dollars per unit.
However, according to data, the token price recently touched $40.
The trading volume with this token has also increased exponentially, with a increased by more than 15.000% in the last few hours.
Source: CoinMarketCap
This data shows that the crypto community has reacted enthusiastically to this court ruling, seeing it as a positive sign for the future of privacy and innovation in the blockchain space. Many cryptocurrency experts and enthusiasts hope that this ruling will pave the way for fairer and more balanced regulation, protecting both users and innovators.
In short, the 5th Circuit Court of Appeals ruling is not only a victory for Tornado Cash, but also for privacy and freedom in the cryptocurrency ecosystem. This legal precedent could have significant implications for future regulations and sanctions in the blockchain space, promoting a more favorable environment for innovation and the protection of user rights.
