The United States Court of Appeals for the Fifth Circuit has made a significant ruling regarding the crypto sphere, declaring that the sanctions imposed on Tornado Cash by the US Treasury Department were not lawful. According to the decision dated November 26, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) exceeded its congressionally defined authority by imposing sanctions on the smart contracts utilized by Tornado Cash.
Understanding the Court’s Ruling
The crux of the court’s decision lies in the nature of Tornado Cash’s smart contracts, which are immutable lines of privacy-enabling software code. These smart contracts cannot be owned by any individual or entity, making them immune to the sanctions typically applied to “property.” The ruling emphasized that these smart contracts do not fall under the category of property belonging to a foreign national or entity. Therefore, they cannot be blocked under the International Emergency Economic Powers Act (IEEPA), indicating that OFAC overstepped its designated authority.
Victory for the Crypto Privacy Sector
This landmark ruling is a monumental victory for advocates of cryptocurrency privacy, who have been facing increasing challenges. The decision underscores the importance of open-source technology in the crypto industry, which can be utilized by anyone regardless of governmental restrictions. Paul Grewal, Chief Legal Officer at Coinbase Global, highlighted that while no one supports criminal activities within crypto protocols, it is unjust to block open-source technology simply because some users misuse it. This ruling represents a crucial triumph for those dedicated to defending privacy and liberty in the digital age.
Ongoing Legal Challenges
Amidst this legal victory, the developer of the Tornado Cash protocol, Alex Pertsev, is seeking an appeal in the Netherlands. Pertsev was previously found guilty of money laundering charges and received a 64-month prison sentence earlier this year. His case continues to unfold as legal experts and crypto enthusiasts watch closely.
Market Implications of the Ruling
The court’s decision has had a notable impact on the market, particularly on the Tornado Cash token. Following the announcement, the token experienced a significant rally, surging more than tenfold before stabilizing. As of the latest market analysis, the altcoin, with a fully diluted market valuation of approximately $146 million, had witnessed a remarkable 500 percent increase in value within a 24-hour period, trading at around $20.66.
This surge signals potential for further rallies, with market analysts eyeing a move towards its all-time high of approximately $436, a level achieved during the 2021 bull market. The ruling has injected renewed optimism into the crypto market, with investors and stakeholders closely monitoring the developments in this dynamic sector.
