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- Coinbase’s Paul Grewal accuses the U.S. Treasury of ignoring a court ruling that deemed Tornado Cash’s immutable smart contracts non-sanctionable.
- The Fifth Circuit ruled Tornado Cash’s contracts aren’t “property,” but the Treasury insists broader sanctions remain due to national security concerns.
- Grewal vows legal action to enforce the court’s decision, challenging the Treasury’s continued restrictions on Tornado Cash.
Coinbase’s head legal officer, Paul Grewal, has directed his anger towards the U.S. Treasury Department for allegedly avoiding a court ruling on the sanctioned crypto mixer Tornado Cash. Grewal’s grievance, published on X (formerly Twitter), denounces the Treasury for abusing sanctions legislation against immutable smart contracts—a point that has been at the heart of an ongoing legal fight.
The issue arises due to a new ruling by the U.S. Court of Appeals for the Fifth Circuit, where the court held that Tornado Cash’s unchangeable smart contracts are not “property” as per the International Emergency Economic Powers Act (IEEPA). This ruling de facto requires Tornado Cash to be delisted from the Treasury’s Specially Designated Nationals and Blocked Persons (SDN) list.
However, even with the ruling, the Treasury has chosen to postpone the removal, citing concerns regarding national security. The agency maintains that although the ruling specifically targets unchangeable smart contracts, Tornado Cash as an entity in general continues to be under sanctions.
Grewal, reacting, blamed the government for disregarding the court decision and congressional oversight. “They tell us: ‘trust us’ to do the right thing based on ill-defined ‘national security interests.’ So they learned little, essentially,” he wrote.
Coinbase Challenges Treasury Over Ban
The Treasury remains resolute in its stance, claiming that Tornado Cash has been used as a dirty money laundering mechanism, with the North Korean state-sponsored hackers being the primary ones to use it. Officials report that North Korea alone stole over 65% of the cryptocurrency that went through mixing services like Tornado Cash in 2021. This reportedly helped fund the nation’s weapons programs.
Furthermore, the Treasury maintains that delisting Tornado Cash too soon might pose security threats, Grewal and Coinbase are countering, promising to appeal the agency’s action. “We are filing a response to affirm the court’s conclusions,” Grewal affirmed, indicating additional legal action.
In the meantime, legal proceedings against Tornado Cash developers continue on multiple fronts. In the Netherlands, Alexey Pertsev, who has been convicted of laundering $1.2 billion through the protocol, has been released on electronic monitoring as he prepares his appeal. His case has generated much attention, with critics arguing that prosecuting developers on the misuse of open-source code sets a dangerous precedent.
Coinbase Pushes Back on Tornado Cash Regulations
In the United States, Tornado Cash co-founder Roman Storm is also in legal jeopardy, with his case set to go to trial in September. Storm has made a motion to dismiss the charges, claiming that Tornado Cash isn’t a financial institution. But the prosecutors argue that his participation in the site makes him responsible.
Moreover, the Tornado Cash legal saga has by far not come to an end, with potential implications for the entire crypto space. If the Treasury maintains its hard line even when faced with court judgments, it could set a precedent for government control over decentralized protocols. And on the other side, the outcome of the trials against the developers could set the limits for liability for the authors of open-source blockchain technology.
With Coinbase spearheading the fight against perceived regulatory overreach, the war over Tornado Cash is on track to be a turning point for crypto regulation, legal responsibility, and the decentralized finance future.
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