Court Overturns Treasury's Sanctions on Tornado Cash 😨

On November 26, the Fifth Circuit Court of Appeals ruled that the U.S. Treasury overstepped its authority by sanctioning Tornado Cash’s immutable smart contracts. The court determined these contracts are not classified as “property” and therefore cannot be blocked under the International Emergency Economic Powers Act (IEEPA).

💡 The ruling emphasized that smart contracts operate autonomously without human intervention, distinguished them from services or property. The judges referred to a “trusted setup ceremony” in May 2020, where over 1,000 participants finalized the contracts’ parameters, ensuring their immutability.

⚖️ The court rejected the Treasury’s interpretation, asserting that “Legislating is Congress’s job.” Coinbase’s Chief Legal Officer, Paul Grewal, praised the decision, stating that blocking open-source technology due to misuse is not aligned with Congressional intent.

📰 While this ruling is a victory for open-source advocates, other aspects of Tornado Cash may still face scrutiny. The initial sanctions were imposed in August 2022 for allegedly facilitating over $7 billion in illicit transactions, prompting a challenge from users, including Coinbase employees.

As this legal battle unfolds, the ruling represents a significant shift in the conversation surrounding the regulation of decentralized technologies 🔗✨