Coinbase Joins Fight Against Tornado Cash Ban – Will You?

Key Points:

• The United States Treasury faces a legal challenge to overturn the decision against Tornado Cash.
• The plaintiffs argue that OFAC exceeded its powers under the IEEPA and violated the Free Speech clause.
• The ban on open-source code is seen as a violation of the First Amendment.

The legal challenge against the United States Treasury over its decision to sanction Tornado Cash has gained attention due to its potential impact on internet privacy rights for US citizens.

Six individuals who are backed by cryptocurrency exchange Coinbase filed a motion for a partial summary judgment on April 5 in a Texas District Court. The plaintiffs argue that the US Office of Foreign Asset Control (OFAC) exceeded its statutory powers under the International Emergency Economic Powers Act (IEEPA) and violated the Free Speech clause under the U.S. Constitution’s First Amendment.

The plaintiffs’ first claim focuses on the fact that OFAC breached a section of the IEEPA that allows the Treasury to take action against the property in which a foreign country or foreign national has an interest. The plaintiffs argue that this provision does not apply to open-source software, like the 20 or so smart contracts that provide functionality to Tornado Cash, because they cannot be owned. They highlight that an immutable smart contract is incapable of being owned, and therefore, it is not property.

The plaintiffs’ second argument is that OFAC’s ban on the open-source code is violating the Free Speech Clause of the First Amendment under the U.S. Constitution. They argue that a total prohibition is grossly disproportionate to the money laundering that accounted for only 0.05% of crypto transactions in 2021. The plaintiffs note that OFAC has authority to take action against “crypto thieves” like North Korea’s Lazarus Group, but a total prohibition on Tornado Cash is not reasonable. They emphasized that banning all uses of Tornado Cash is akin to banning the printing press because a tiny fraction of users might publish instructions on how to build a nuclear weapon.

The plaintiffs’ motivation behind the motion is part of a broader effort to restore internet privacy rights for U.S. citizens. The case has gained significant attention as it has the potential to set a precedent for internet privacy rights and the powers of OFAC. Alexey Pertsev, the creator of Tornado Cash, also faces his own legal battle in The Netherlands on a series of money laundering charges.

The legal challenge against the United States Treasury has gained attention due to its potential impact on internet privacy rights for US citizens. The plaintiffs argue that OFAC exceeded its statutory powers under the International Emergency Economic Powers Act and violated the Free Speech clause under the US Constitution’s First Amendment. Their arguments focus on the fact that open-source software cannot be considered property and that a total prohibition on Tornado Cash is not reasonable. The case has the potential to set a precedent for internet privacy rights and the powers of OFAC.

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