Tornado Cash token surges to 2-year high after US court rules Treasury sanctions unlawful

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The price of Tornado Cash’s TORN token skyrocketed to a two-year high after a US federal appeals court ruled that the US Treasury Department’s sanctions on the platform were unlawful.

Tornado Cash is an on-chain privacy tool that uses immutable smart contracts to enable anonymous crypto transactions.

The platform was sanctioned in 2022 by the US Treasury’s Office of Foreign Assets Control (OFAC). It alleged that it aided the laundering of over $7 billion in crypto, including stolen funds, by hacking groups linked with North Korea.

The judgement

On Nov. 26, the US Court of Appeals determined that the Treasury exceeded its authority by sanctioning Tornado Cash’s immutable smart contracts. As open-source software, these contracts do not belong to any person or foreign entity and, therefore, cannot be subjected to sanctions.

The court highlighted a critical 2020 event called the “trusted setup ceremony,” where over 1,000 participants contributed cryptographic data to finalize Tornado Cash’s parameters. This process rendered the smart contracts immutable, eliminating any form of updates or administrative control. Governance was later handed to the Tornado Cash community through the TORN token.

The judges ruled that these contracts operate autonomously and do not meet the legal definition of property or services under the International Emergency Economic Powers Act (IEEPA). They also pointed out that the smart contracts have continued to operate despite the OFAC’s sanction.

Consequently, OFAC cannot sanction them unless Congress updates the law to account for technologies like crypto-mixing tools.

The Judges stated:

We hold that Tornado Cash’s immutable smart contracts (the lines of privacy-enabling software code) are not the ‘property’ of a foreign national or entity, meaning they cannot be blocked under IEEPA, and OFAC overstepped its congressionally defined authority.”

Following the ruling, data from CryptoSlate shows that TORN surged to a two-year high of $40 before falling back to around $18, marking a 400% increase within 24 hours. Despite this rally, the token remains 96% below its all-time high of $436 recorded in February 2021.

Crypto community celebrates

The decision was widely celebrated within the crypto community., with industry leaders calling it a landmark victory for decentralized technologies and privacy rights.

Coinbase’s Chief Legal Officer, Paul Grewal, emphasized that this ruling protects open-source software from unjust sanctions. He noted that while addressing illicit activities is essential, targeting decentralized protocols with blanket restrictions oversteps legal boundaries.

He stated:

“No one wants criminals to use crypto protocols, but blocking open source technology entirely because a small portion of users are bad actors is not what Congress authorized. These sanctions stretched Treasury’s authority beyond recognition, and the Fifth Circuit agreed.”

Bill Hughes, Consensys’ senior counsel and director of global regulatory matters, explained that the judgment does not mean that the rest of Tornado Cash is also out of bounds for Treasury/OFAC. However, the issue was about smart contracts with no admin key.

Hughes added:

“[This is] a good win. One which the Supreme Court would be unlikely to reverse. Another case where Loper Bright helped because the court wasn’t required to defer to a permissible reading by the agency.”

The post Tornado Cash token surges to 2-year high after US court rules Treasury sanctions unlawful appeared first on CryptoSlate.

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