The recent ruling by a US federal appeals court that deemed the US Treasury Department’s sanctions on Tornado Cash as unlawful has caused a significant surge in the price of TORN tokens. Tornado Cash is a platform that provides on-chain privacy tools using smart contracts to facilitate anonymous crypto transactions.
In 2022, the platform was sanctioned by the US Treasury’s Office of Foreign Assets Control (OFAC) on the grounds that it was involved in facilitating the laundering of over $7 billion in crypto, including stolen funds, by hacking groups associated with North Korea.
The court ruling on November 26th stated that the Treasury had overstepped its authority by sanctioning Tornado Cash’s immutable smart contracts. The court highlighted the “trusted setup ceremony” in 2020, where the smart contracts were finalized by over 1,000 participants, making them immutable and beyond the reach of any updates or administrative control. The governance of the platform was later handed over to the Tornado Cash community through the TORN token.
The judges emphasized that the smart contracts operate autonomously and do not fall under the legal definition of property or services as per the International Emergency Economic Powers Act (IEEPA). They stated that OFAC cannot sanction these contracts unless Congress updates the law to address technologies like crypto-mixing tools.
Following the court’s decision, the price of TORN tokens surged to a two-year high of $40 before settling around $18, marking a 400% increase within 24 hours. Despite this rally, the token remains significantly below its all-time high of $436 recorded in February 2021.
The crypto community has widely celebrated the court ruling, with industry leaders hailing it as a landmark victory for decentralized technologies and privacy rights. Coinbase’s Chief Legal Officer, Paul Grewal, highlighted that the ruling protects open-source software from unjust sanctions and underscores the importance of addressing illicit activities without imposing blanket restrictions on decentralized protocols.
Consensys’ senior counsel and director of global regulatory matters, Bill Hughes, clarified that the judgment specifically pertains to smart contracts without an admin key and does not imply that the rest of Tornado Cash is immune from Treasury/OFAC scrutiny.
Overall, the court ruling has been viewed as a significant win for the crypto community, upholding the principles of decentralized technologies and privacy rights in the face of regulatory challenges.