The Fifth Circuit Court’s recent ruling on Tornado Cash has sparked optimism among decentralized protocols on Ethereum and privacy-focused tokens, leading to significant gains. The court determined that immutable smart contracts are not considered property and can’t be sanctioned under existing laws, a decision that some observers believe is a major victory for privacy advocates.
Though the ruling does not directly endorse money laundering, it sets a precedent for programmers to develop and release smart contract protocols without fear of sanction, as long as they do not charge fees. This ruling could also provide developers with more clarity on what they can build without falling under regulatory scrutiny, especially on Ethereum, which hosts the majority of decentralized applications.
The news has had a positive impact on crypto markets, with TORN, Tornado Cash’s native token, experiencing a surge of over 380% early on Thursday. While privacy coins as a category have since seen less than 2% in total gains over the past 24 hours, the decentralized finance’s market cap has jumped 8.2% and further 21.5% on the week, according to CoinGecko data.
Uniswap (UNI), Aave (AAVE), and Ethenea (ENA) have also seen significant gains, reaching their highest points in 2.5 years, 5 months, and 8 months, respectively. The ruling’s scope is specific to immutable smart contracts without administrative control, meaning projects with upgradeable contracts or centralized elements could still face regulatory scrutiny.
As a crypto mixing platform, Tornado Cash falls under this scope, but not entirely. The case will now be reviewed by a district court under the Fifth Circuit’s interpretation. Meanwhile, Alexey Pertsev, the Tornado Cash developer found guilty by a Dutch court in May over a money laundering case, remains in jail.
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