In a significant ruling for the crypto industry, a panel of federal judges determined that the U.S. Treasury Department unlawfully sanctioned the cryptocurrency mixing service Tornado Cash in 2022. The sanctions were initially imposed by the Treasury's Office of Foreign Assets Control (OFAC) due to allegations that Tornado Cash was used to launder over $7 billion in cryptocurrency. Users of Tornado Cash, supported by Coinbase, contested these sanctions in court. A Texas federal judge had previously sided with OFAC, but the appeal to the Fifth Circuit resulted in a reversal. Judge Don Willett emphasized that Tornado Cash operates via immutable smart contracts and cannot be classified as “property,” thus falling outside OFAC’s authority. The Treasury has yet to comment on the ruling or indicate if they will appeal. The case's outcomes may also affect ongoing legal issues against Tornado Cash founders, who face charges related to money laundering and sanctions violations. The court's decision underscores the complexities of regulating technologies in the evolving cryptocurrency landscape.

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