The Fifth Circuit Court’s recent ruling on Tornado Cash has been met with optimism in the cryptocurrency community, as decentralized protocols on Ethereum and privacy-focused tokens have experienced significant gains. On Wednesday, the court determined that immutable smart contracts are not considered property and cannot be sanctioned under existing laws, which some observers claim as a significant victory for privacy advocates.
The court’s decision does not endorse money laundering but establishes a precedent that allows programmers to develop and release smart contract protocols without fear of sanction, as long as they do not charge fees. This could provide developers with more clarity on what they can build without crossing regulatory boundaries, especially on Ethereum, which hosts the majority of decentralized applications.
After the news, crypto markets reacted positively, with TORN, Tornado Cash’s native token, surging over 380% early Thursday, though privacy coins as a category have since tapered off. However, decentralized finance’s market cap has jumped 8.2% and 21.5% on the week, according to CoinGecko data. Among the largest gainers are Uniswap (UNI), Aave (AAVE) and Etherean (ENA), which have all reached their highest points in 2.5 years, 5 months, and 8 months, respectively.
10X Research commented on the positive implications of the ruling for the broader DeFi ecosystem and other protocols, particularly on the Ethereum network. It stated that this decision could have enormous implications for the industry. However, the ruling’s scope is specific to immutable smart contracts without administrative control.
Projects with upgradeable contracts or centralized elements may still face regulatory scrutiny. Tornado Cash, as a crypto mixing platform, falls under this scope, but not entirely. The case has now returned to a district court for further review 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.
Pertsev expressed his disappointment in a recent tweet, stating that the court’s decision prolongs his pre-trial detention, complicating his ability to prepare for the appeal. However, he remains determined to continue fighting for justice.
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