A group of plaintiffs backed by Coinbase is waging a legal battle against the US government. The goal is to end the sanctions imposed in August 2022 on the Tornado Cash protocol. These prohibit US citizens and businesses from using the cryptocurrency mixer.
Tornado Cash case: coinbase stands up against US sanctions
The Tornado Cash protocol brings more privacy to cryptocurrency users. The US government does not see this in a good light. This is why, since 2022, Tornado Cash has been blacklisted by OFAC. Thus, American entities are prohibited from using it, a decision that has made Coinbase cringe since last year.
The crypto industry does not intend to give in to government pressure. Joseph VanLoon, Tyler Al Meida, Alexander Fisher, Preston Van Loon, Kevin Vitale And Nate Welch filed a lawsuit against the US Office of Foreign Assets Control (OFAC), Janet Yellen, Secretary of the Treasury, and Andrea Gacki, Director of OFAC, who are the defendants in this case.
Backed by the Coinbase exchange, the plaintiffs demand partial summary judgment in the United States District Court of Texas. They believe that the sanctions imposed on Tornado Cash are illegal.
Two laws come into play in this case. First the IEEPA law (International Emergency Economic Powers Act) and that on the sanctions against North Korea. For the plaintiffs, the government cannot sanction Tornado Cash because it is not a national or a foreign person, but simply computer software.
They also argue that the smart contracts at the core of the software cannot be controlled or owned by anyone. Therefore, these sanctions against Tornado Cash would violate the First Amendment.
The consequences of the Affair on the crypto sector
If OFAC can sanction immutable, open-source software code, it could, according to the plaintiffs, prohibit intangible concepts that cannot be classified as property. Subsequently, it could hamper the growth and development of the entire cryptocurrency industry.
The ongoing legal battle highlights the challenges faced by regulators and cryptocurrency companies. They must strike a balance between protecting consumers and preventing illegal activities. Thus, the court’s decision in this case will likely have significant implications for the crypto sector.
If the court upholds the Coinbase-backed plaintiffs, it could encourage other companies and individuals in the cryptocurrency industry to challenge sanctions and regulations they believe are unfair or disproportionate.
On the other hand, if the court decides in favor of the US government, it could confirm the power of regulators to impose sanctions and restrictions on crypto companies, individuals, and even software.
Whatever the outcome of this case, it highlights the need for public debate and constructive dialogue between stakeholders. Regulation must evolve to take into account the complexity and rapidity of technological change, while preserving the rights and fundamental freedoms of users.
Receive a digest of news in the world of cryptocurrencies by subscribing to our new service of daily and weekly so you don’t miss any of the essential Tremplin.io!
