Immutable smart contracts defeat the SEC in court
Today's sensational news: immutable smart contracts defeated the Treasury in court, with a U.S. court ruling that the sanctions imposed by the SEC on the cryptocurrency mixer Tornado Cash are illegal. This ruling overturned a previous decision and shocked the cryptocurrency industry, significantly impacting the future development of the decentralized finance sector.
The announcement states, 'The immutable smart contracts involved in this appeal are not property, as they cannot be owned. Over a thousand volunteers participated in the trusted setup ceremony to irrevocably remove anyone's options to update, delete, or otherwise control these lines of code,' while also recognizing the immutable smart contracts of Tornado Cash, 'No one can 'exclude' anyone from using the Tornado Cash smart contracts.'
In short, regardless of how OFAC designates Tornado Cash, immutable smart contracts will continue to operate. Furthermore, since the software will continue to run regardless of any sanctions, and blockchain technology 'allows peer-to-peer transfers... without the recipient's consent to transfer.'
However, the victory of this appeal does not result in the release of Roman, the founder of TORN. The Department of Justice stated that the services operated by Roman violated sanctions regulations, illegally transferred funds, and facilitated money laundering, which does not change these accusations.
The Tornado Cash sanctions incident timeline
Tornado Cash is a decentralized mixing service based on Ethereum, primarily designed to mix users' deposits together through smart contracts and then distribute them, making the source of funds untraceable. Since its launch in 2019, Tornado Cash has been widely welcomed in the cryptocurrency community for its privacy protection features. This anonymity has also attracted the attention of regulators.
In August 2022, the U.S. Treasury's Office of Foreign Assets Control (OFAC) announced sanctions against Tornado Cash, accusing it of helping hackers and criminals launder money, involving amounts as high as $7 billion. OFAC pointed out that this includes activities of the North Korean-related hacking group Lazarus Group laundering funds through Tornado Cash. Subsequently, Tornado Cash's official website was shut down, its code repository was removed from GitHub, and the GitHub account of one of its co-founders, Roman Semenov, was also suspended.
This sanction triggered a strong reaction from the cryptocurrency community. Many users and supporters believe that this sanction is unfair and poses a threat to innovation and privacy rights in the cryptocurrency industry. Users of Tornado Cash, with the support of Coinbase, filed a lawsuit to overturn this sanction.
After a lengthy legal process, today three judges from the U.S. Fifth Circuit Court of Appeals ruled that OFAC's sanctions exceeded its authority, because Tornado Cash's smart contracts do not constitute 'property' and, therefore, cannot be sanctioned under the International Emergency Economic Powers Act (IEEPA). This ruling overturned a previous decision and marked a significant victory for cryptocurrency privacy rights.
Ripple's Chief Legal Officer Stuart expressed in a post regarding this ruling, 'Regulators do not make laws; they enforce them as written. If they want more power, only a Congress accountable to the people can grant them that power.'
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Victory for privacy rights, victory for DeFi
This court ruling is not just a victory for Tornado Cash users, but a significant victory for the entire decentralized finance sector. The ruling confirmed the legal status of smart contracts as open-source code, emphasizing that they do not belong to any individual or entity's 'property', and therefore cannot be arbitrarily sanctioned. This ruling provides greater legal protection for cryptocurrencies and decentralized applications, encouraging technological innovation.
With the accelerated development of digitalization, users' demand for privacy is increasing. Tools like Tornado Cash provide users with the possibility of anonymous transactions, allowing them to better protect their personal privacy.
Since the announcement of this news, the TORN token has surged, with an increase of up to 422% within 24 hours, now reported at $133.29.
However, this does not mean that Tornado Cash is completely free from legal risks. Consensys lawyer Bill Hughes pointed out that this ruling only applies to smart contracts without an administrator key, and other aspects may still face legal challenges. Regulators may still take action against other aspects of Tornado Cash.
Summary
This ruling gives new life to Tornado Cash and has a positive impact on the future of the decentralized finance industry. The game between regulation and technology has entered a new phase, and finding a balance between protecting privacy and preventing crime will become a key issue for the future development of decentralized finance. This ruling by the U.S. court may just be the beginning of this complex process.