Crypto Advocates Fight To Remove ‘Unlawful’ Sanctions On Tornado Cash

Recently, pro-crypto groups and regulators have challenged each other legally based on the legality of crypto organizations and operations. 

In a new development, the Blockchain Association and the DeFi Education Fund joined other crypto advocates to support Coin Center’s Lawsuit against the United States Treasury.

This lawsuit bordered on what the groups described as unlawful sanctions against Tornado Cash.  The amicus brief filed on June 2, 2023, sought the removal of US sanctions against the crypto mixer. 

An amicus brief is a legal document handed to a law court containing advice or information about a case by a person or organization not directly involved in the original case. 

Blockchain And DeFi Education Slam Tornado Cash Sanctions

The Blockchain Association and the DeFi Education Fund argued against unlawful sanctions against crypto mixing company Tornado Cash.

According to the advocates, the sanctions imposed by the Treasury’s Office of Foreign Assets Control (OFAC) are unprecedented and unlawful.

They argued that the OFAC lacked the authority to sanction software like Tornado Cash, as such sanctions have not occurred before now. 

Furthermore, they stated that while the OFAC had the legal jurisdiction to sanction people and property, they lacked such control over a decentralized protocol. 

Additionally, the advocates believe that the sanction on Tornado Cash infringes on the right to free speech and due process. 

They also added that the sanctions imply that Americans who desire to engage in anonymous speech or association can no longer engage in such actions. 

The advocates noted that the protocol suffered malicious use for money laundering by North Korean-linked hackers. However, they argued that the same protocol found other productive uses, such as enhancing privacy on the publicly viewed Ethereum blockchain. As such, these groups believe the sanctions are unlawful and the law should prohibit their enforcement.  

Both groups filed a similar amicus brief in April 2023, supporting an identical lawsuit filed by six individuals against the treasury department over its Tornado Cash sanctions.

US Treasury Frowns At Increasing Illicit Activities In DeFi

On April 6, 2023, the US Treasury released a risk assessment report on DeFi’s illicit crypto transactions. According to the report, bad actors such as the Democratic People’s Republic of Korea (DPRK), cyber criminals, ransomware attackers, and scammers use DeFi services for money laundering. Also, they stated that these bad actors exploit vulnerabilities and latch onto them.

These loopholes arise because most DeFi services do not implement anti-money laundering or a way of countering the financing of terrorism.

Therefore, the US treasury believes non-compliance and weak AML/CFT controls are the major problems in the crypto sector.

However, this stance generates controversy among crypto organizations like the Blockchain Association. These groups believe that cryptocurrencies and their services must remain decentralized and anonymous.

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