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Court rules OFAC exceeded authority in Tornado Cash sanctions

Court rules OFAC exceeded authority in Tornado Cash sanctions

GrafaGrafa2024/11/27 06:40
By:Isaac Francis

In a significant legal victory for Tornado Cash (CRYPTO:TORN) users, a U.S. appeals court has ruled that the Treasury’s Office of Foreign Assets Control (OFAC) overstepped its authority in sanctioning the crypto mixer’s immutable smart contracts.

The Fifth Circuit Appeals Court issued its decision on November 26, overturning an earlier ruling and granting users a partial summary judgment.

The court determined that Tornado Cash’s immutable smart contracts, described as "lines of privacy-enabling software code," do not qualify as property under the International Emergency Economic Powers Act (IEEPA).

"They cannot be blocked under IEEPA, and OFAC overstepped its congressionally defined authority," the court stated.

The IEEPA allows the U.S. President to regulate certain financial transactions, but the judges clarified that Tornado Cash’s immutable contracts lack ownership or administrative control, making them exempt from these restrictions.

However, legal experts caution that this ruling applies specifically to smart contracts with no admin keys and does not absolve other parts of Tornado Cash from further scrutiny.

The case stems from OFAC's decision in August 2022 to sanction Tornado Cash, alleging it facilitated over $7 billion in cryptocurrency laundering since 2019.

This led to lawsuits by Tornado Cash users and advocacy groups, supported by Coinbase, arguing that the sanctions violated legal boundaries.

"These smart contracts must now be removed from the sanctions list, and U.S. persons will once again be allowed to use this privacy-protecting protocol," stated Coinbase’s Chief Legal Officer Paul Grewal, following the recent judgment.

The ruling triggered an 866% surge in Tornado Cash’s token (TORN), reaching a two-year high of $34.98.

Despite this victory, Tornado Cash may still face further regulatory challenges from U.S. authorities.

At the time of reporting, the Tornado Cash (TORN) price was $19.28.  

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