After so much noise about Tornado Cash, the crypto advocacy group Coin Center filed a lawsuit against the US Treasury, the secretary of the Treasury Janet Yellen, and the Office of Foreign Assets Controls (OFAC) because of sanctions on Tornado Cash.
What happened to Tornado Cash?
Coin transactions are made anonymous through the Ethereum privacy protocol known as Tornado Cash. However, in August 2022, the US Treasury Department effectively forbade citizens of the country from using the protocol.
The prohibition was reportedly implemented for national security reasons, because Tornado Cash has been used by the North Korean hacker organization Lazarus to launder stolen money ostensibly.
Coin Center sues the US Treasury
In a court petition, Coin Center claims that the government’s sanctioning of Tornado Cash goes beyond what the Treasury is legally permitted to do. Tornado Cash can be used to obtain these advantages lawfully. According to the Coin Center complaint, Americans have a right to privacy and a right to defend their property this way.
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According to a court document filed on October 12th, Coin Center follows Coinbase’s example and has filed a lawsuit against the US Treasury over the Tornado Cash restriction. On September 8th, 2022, Coinbase published a blog post titled “Defending Privacy in Crypto,” in which it revealed its legal action against the government agency.
It basically focuses on the fact that the US Treasury exceeds its authority because people should have the right to privacy. But, on the other hand, US Treasury thinks there are too many illegal activities happening through Tornado Cash and it should be forbidden.
They fight back
Here is Coin Center's new, full analysis of the Tornado Cash action by OFAC. Bottom line: We believe that OFAC has overstepped its legal authority and are exploring a court challenge. https://t.co/6bh1TgtTCx
— Jerry Brito (@jerrybrito) August 15, 2022
It’s been more than two months since the Ethereum mixer Tornado Cash was banned. Since then, this decision has been criticized by many well-known crypto users and proponents. In the court document, Coin Center mentions the Ethereum users who are the plaintiffs, and they explain how completely transparent the Ethereum blockchain is.
“To protect themselves, users of Ethereum employ privacy tools. These tools generally allow users to clear any publicly discernible connection between their past and future transactions. They do this by making transactions by the same person appear unrelated, thereby stymying bad actors who seek to track, stalk, retaliate, and endanger,” the lawsuit states.
The issues Coinbase raised in September are quite similar to Coin Center’s complaints to the Treasury. Additionally, Coinbase stated that there are valid uses for this technology and that many innocent users have lost access to a crucial privacy tool and now have their cash trapped as a result of these sanctions.
The Florida court documents for Coin Center’s case state that the defendant’s conduct on August 8th, 2022, when OFAC formally outlawed Tornado Cash, was illegal. Tornado Cash users are viewed as criminals, Coin Center states. Even worse is that even if someone got a payment without knowing, it is considered a federal crime.
What will happen from now on?
The US Treasury is significantly stepping into the decentralized and anonymous sphere of cryptocurrencies that promotes a ‘freedom of speech.’ Cryptocurrencies were created to provide simple, fast and cheap transactions with anonymity and privacy.
However, the Treasury obviously disagrees and wants to rule out something that intervenes with the basic foundation of cryptocurrencies. If these kinds of actions continue, it could cause severe problems to Bitcoin and altcoins and make it seem ‘illegal.’ Freedom of speech connected to money and digital world was created when Bitcoin appeared.
Suddenly, people could transfer capital seamlessly, which introduced a new type of money. The government cannot entirely ban cryptocurrencies as they run on the global network of computers, but they can make it much harder for crypto users. Some other protocols may be banned in the future as well.
Ethereum has just recently transitioned from the PoW mechanism to PoS, which was widely celebrated. Now investors may start to get scared as federal agencies eye Ethereum’s status. The year 2022 will definitely go down in history as one of the toughest years for the crypto space as also more than $3 billion was lost in hacks. But will other protocols be banned as well?