Coin Center — a nonprofit crypto policy think tank — is planning to challenge the US Treasury Department’s Office of Foreign Assets Control (OFAC) in court.
The challenge is a response to OFAC’s recent addition of the Tornado Cash privacy protocol to its Specially Designated Nationals and Blocked Persons (SDN) list. Coin Center provided extensive legal analysis arguing that this is beyond the office’s statutory authority.
Why was Tornado sanctioned?
According to the think tank statement On Monday, OFAC’s action presents a potential violation of Americans’ constitutional rights to free speech and due process. Further, he alleges that OFAC failed to act appropriately to mitigate the impact these sanctions would have on ordinary Americans.
“We intend to work with other digital rights advocates to achieve administrative relief,” Coin Center said. “We are also considering challenging this action in court.”
FOCA collected its sanctions against Tornado Cash last week, becoming widespread worry leaders of the crypto community on the implications they could have for the entire digital asset industry. Concerns grew when a 29-year-old developer behind the protocol was stopped in Amsterdam a few days later.
By comparison, Coin Center noted that the department’s sanctions against Blender.io — another cryptocurrency mixer — elicited no response from the industry in May. Both Blender.io and Tornado have been flagged by the department for their ties to North Korean entities, including the Democratic People’s Republic of Korea (DPRK) and hacker Lazarus Group.
Penalize people against the code
The nonprofit argued that sanctioning Blender makes sense, given that it is a “person or group of persons” that provides Bitcoin mixing services. In contrast, Tornado Cash does not necessarily represent a “person” responsible for shuffling customer coins, but is simply open-source code.
Specifically, the Tornado Cash mixer smart contract was created in such a way that it cannot be changed once deployed. Therefore, anyone responsible for their deployment cannot choose which clients to serve and which to deny, whether they want to or not. Therefore, there is a clear distinction between Tornado Cash as an “entity” and as an “application” – unlike Blender.
The Financial Crimes Enforcement Network (FinCEN) – another arm of the Treasury Department – made the same distinction between “anonymizing service providers” and “anonymizing software providers” in its May 2019 Guidance Document on virtual currency business models.
“FinCEN guidance shows that what we are suggesting here is neither new nor strange,” Coin Center added.
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