The Blockchain Association Has rejected the Tornado Cash Regulations as “Unprecedented and Unlawful”

In an amicus brief, the Blockchain Association and the DeFi Education Fund argued that the U.S. Treasury Department’s decision to penalise Tornado Cash was “unprecedented and unlawful.”

Tornado Cash was the most widely used privacy-enhancing technology on Ethereum, the second-biggest digital asset market in the world before OFAC imposed penalties. The programme runs without any help from a person and is self-executing computer code published on the Ethereum blockchain.

The submission claims that the authority’s decision to ban Tornado Cash is based on a fundamental misunderstanding of the programme and its operation. Before the OFAC penalties, the protocol was the most widely used privacy-protecting mechanism on Ethereum.

The amicus brief emphasises Tornado Cash’s value in preserving users’ anonymity while transacting with digital assets. It claims that the use of digital assets is on the rise in the United States, with 20% of people now holding some kind of digital asset and another 29% wanting to do so in the near future.

The brief also acknowledges that although programmes like Tornado Cash have criminal applications, their primary uses are lawful and beneficial to society. Additionally, the complaint states that the penalties are the product of “arbitrary and capricious decision-making” on the part of OFAC and go beyond the scope of the agency’s legislative jurisdiction.

On November 18, 2021, OFAC sanctioned the protocol along with seven other organisations for enabling ransomware payments. Of course, because of Tornado Cash’s status as a “Specially Designated National” (SDN), it’s illegal for citizens of the United States to conduct business with or provide services to the protocol. Executive Order 13694, which imposes punishment on anyone engaging in harmful cyber activity, is the legal basis for the measures taken against Tornado Cash.

According to Bitcoinist, the cryptocurrency research tank Coin Centre has been a strong opponent of the Treasury Department’s move to penalise Tornado Cash. The Coin Centre stated that the government’s actions against Tornado Cash were unwarranted and might have far-reaching effects on the cryptocurrency market.

Coin Centre also mentioned Tornado Cash, an open-source system that enables users to anonymize their Ethereum transactions by mixing them with those of other users. Coin Centre acknowledged that the platform may be misused, but countered that the same could be said of currency and the internet.

Coinbase, another cryptocurrency exchange, took a similar stance, supporting a group of litigants who sought the lifting of U.S. government restrictions against Tornado Cash.

The Blockchain Association and the DeFi Education fund are two of the most influential non-profits working to provide an enabling legislative climate for blockchain technology innovation in the digital asset industry. Their mission is to spread awareness of blockchain technology and decentralized finance (DeFi) among policymakers, regulators, judges, and the general public.

The ruling has far-reaching implications for the blockchain ecosystem and the digital asset market, and it poses important legal and constitutional problems. It is vital that the court give careful consideration to the reasons stated in the brief since the outcome of this case might establish a precedent for how governments regulate blockchain technology and decentralized finance.

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