A US appeals court has ruled that the Treasury Department's Office of Foreign Assets Control (OFAC) overstepped its authority by sanctioning Tornado Cash's immutable smart contract.
In August 2022, OFAC sanctioned cryptocurrency mixer Tornado Cash for its involvement in laundering over $7 billion in cryptocurrencies since its founding in 2019. The agency alleged that Tornado Cash facilitated illegal activities such as money laundering by the North Korean hacker group Lazarus. .
court decision
On November 26, 2024, the Fifth Circuit Court of Appeals filed an opinion stating that OFAC overstepped its authority by sanctioning Tornado Cash's immutable smart contract. The court emphasized that these smart contracts are self-executing lines of code without administrative control and do not constitute “property” under the International Emergency Economic Powers Act (IEEPA).
The court's opinion is that while OFAC has the authority to regulate property, the immutable nature of these smart contracts means that they cannot be owned or controlled by any entity, and therefore OFAC's He emphasized that it does not fall under his jurisdiction.
Source:X
Impact on the virtual currency industry
The ruling is seen as a significant victory for the cryptocurrency industry, particularly proponents of decentralized finance (DeFi) and open source software development. This highlights the legal distinction between the authorization of individuals or entities and the authorization of autonomous software protocols.
“These smart contracts must be removed from the sanctions list and Americans will once again be allowed to use this privacy protection protocol,” said Paul Grewal, Coinbase's chief legal officer. Ta.
Although the court's decision lifts sanctions against Tornado Cash's smart contracts, it does not prevent OFAC from targeting individuals and entities that misuse such protocols for illegal activities. The ruling calls for a nuanced approach to regulating decentralized technology, balancing the need for oversight with the importance of innovation and privacy.
As the cryptocurrency landscape continues to evolve, this case sets a precedent for how autonomous software protocols will be treated under U.S. law and could impact future regulatory actions and the development of decentralized applications. be.
