How the Tornado Cash ruling is a victory for crypto
The Fifth Circuit Court of Appeals ruled in Van Loon v. Department of Treasury that the Treasury Department’s Office of Foreign Assets Control (OFAC) exceeded its authority by sanctioning Tornado Cash’s immutable smart contracts. The court determined that such unchangeable computer code does not qualify as property under existing law. Tornado Cash, a cryptocurrency anonymizing service, was sanctioned after being linked to North Korean hackers laundering stolen funds. The ruling establishes a safe harbor for decentralized protocols, indicating that while individuals can be sanctioned, the underlying code cannot be. The court acknowledged the need for Congress to update the 1977 International Emergency Economic Powers Act to address modern technologies. The ruling highlights the challenge of regulating privacy-preserving technologies used for both legitimate and illicit purposes. It emphasizes the necessity for updated laws that accommodate decentralized systems while addressing security concerns, marking a significant victory for technological innovation in the cryptocurrency space.
