Court Ruling Protects Tornado Cash Users in Privacy Case

A recent decision by the U.S. Court of Appeals is a big win for users of Tornado Cash, a tool that focuses on privacy in cryptocurrencies. This case, known as Van Loon v. Treasury, determined that the decentralized software of Tornado Cash is not subject to U.S. sanctions law.
The issue started in August 2022 when the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned Tornado Cash, claiming that the platform was being used for illicit activities like money laundering by masking the origins of cryptocurrency transactions.
Tornado Cash operates through automated code called “immutable smart contracts,” which help enhance user privacy by hiding the specifics of digital currency transactions.
A group of Tornado Cash users pushed back against the sanctions. They argued that OFAC had gone beyond its powers, emphasizing that Tornado Cash is simply a tool that many users use for legitimate reasons, such as safeguarding financial information. They made it clear that the software shouldn’t be penalized just because a few individuals misuse it.
The users also highlighted that not everyone using Tornado Cash is engaging in illegal activities. They explained that the tool has valid applications, especially in a time when digital transactions are becoming more transparent.
The crucial question in the case was whether immutable smart contracts could be considered “property” owned by foreign individuals or entities, justifying sanctions against them.
The Fifth Circuit sided with the users, ruling that OFAC had overstepped its boundaries. The court clarified that privacy tools like Tornado Cash’s smart contracts cannot be seen as the property of any person or group, either foreign or domestic. This distinction is important because U.S. sanctions laws target individuals and organizations, not automated computer codes.
The court’s decision also recognized that privacy tools like Tornado Cash can be legitimately used. It underscored that protecting one’s financial privacy is not inherently criminal and that such tools can be beneficial in various scenarios, from securing personal finances to business transactions.
This ruling marks a significant moment for cryptocurrency enthusiasts, emphasizing the importance of privacy while curbing governmental control over digital platforms.
The article also mentions the indictment of Tornado Cash co-founders for charges related to money laundering and sanctions breaches. Further legal actions are being taken against developers involved in Tornado Cash transactions. Lawmakers are urging the Treasury for updates on measures taken against this issue, emphasizing its importance and impact in today’s financial landscape.