Blockchain Association and DeFi Education Fund Stand Against Unprecedented Sanctions on Tornado Cash

In a groundbreaking move, the Blockchain Association and DeFi Education Fund have joined forces to challenge the U.S. Treasury Department’s controversial decision to impose sanctions on Tornado Cash, a leading privacy-protecting tool on the Ethereum blockchain. This unprecedented and unlawful action has sent shockwaves throughout the digital asset community, prompting these organizations to file an amicus brief.

Tornado Cash, renowned for safeguarding user privacy on the second-largest digital asset platform, Ethereum, is a fully autonomous software executed on the blockchain without human intervention. However, the Treasury Department’s sanctions stem from a fundamental misunderstanding of the technology and its functions.

The amicus brief stresses the critical role Tornado Cash plays in protecting the privacy of digital asset users, a matter of utmost importance as the adoption of digital assets skyrockets. Surveys indicate that 20 percent of American adults already own digital assets, with an additional 29 percent planning to enter the market. It is crucial to recognize that while Tornado Cash can be misused for illicit purposes, its primary purpose is legitimate and socially valuable.

Moreover, the brief argues that the imposed sanctions extend beyond the legal boundaries of the Office of Foreign Asset Control (OFAC), asserting that they result from arbitrary decision-making. OFAC’s sanctions, implemented under Executive Order 13694, targeted Tornado Cash alongside seven other entities allegedly involved in ransomware payments. The designation of Tornado Cash as a “Specially Designated National” restricts U.S. individuals from transacting or providing services to the protocol.

Coin Center, a prominent crypto think tank, has been vocal in its criticism of the Treasury’s actions. It points out that Tornado Cash is an open-source protocol that allows users to mix Ethereum transactions for enhanced privacy. Coin Center contends that similar to other technologies like cash and the internet, Tornado Cash can be used illicitly but primarily for legitimate purposes.

Additionally, the plaintiffs Joseph Van Loon, Tyler Al-meida, Alexandra Fisher, Preston Van Loon, Kevin Vitale, and Nate Welch, backed by cryptocurrency exchange Coinbase, emphasize that Tornado Cash is merely software and not subject to sanctions as a foreign national or person. This argument challenges the government’s authority to impose sanctions on non-human entities.

The Blockchain Association and DeFi Education Fund are well-respected nonprofit organizations committed to cultivating a favorable policy environment for the digital asset economy and fostering innovation in blockchain technology and decentralized finance (DeFi). They strive to educate policymakers, regulators, courts, and the general public on the benefits and nature of these technologies.

This landmark case raises significant regulatory and constitutional concerns reverberating across the blockchain ecosystem and the digital asset economy. The outcome will set a crucial precedent for governmental regulation of blockchain technology and DeFi. The court must fully consider the compelling arguments presented in the amicus brief to ensure a fair and informed decision that will shape the industry’s future.