Blockchain Association Challenges OFAC’s Sanctions on Tornado Cash

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Key Takeaways

  • Blockchain Association noted that OFAC’s decision to sanction the privacy-centric crypto mixer went beyond its statutory authority.
  • Blockchain Association contended that this move was both arbitrary and capricious

The Blockchain Association, once again, is rallying behind six plaintiffs in their legal battle against the U.S. Treasury Office of Foreign Assets Control (OFAC) over sanctions on Tornado Cash.

In a recent amicus curiae brief submitted on November 20 to a U.S. appellate court, the blockchain advocacy group argued that OFAC’s decision to sanction the privacy-centric cryptocurrency mixer not only posed legal questions but also went beyond its statutory authority.

The Blockchain Association contended that this move was both “arbitrary and capricious,” violating fundamental principles outlined in the U.S. Constitution. This comes after a lower court upheld OFAC’s decision to include Tornado Cash in its list of sanctioned entities.

Senior counsel Marisa Coppel from the Blockchain Association emphasized that OFAC should prioritize targeting bad actors rather than imposing a sweeping ban on tools like Tornado Cash. Coppel argued that such tools have legitimate use cases and are beyond the jurisdiction of OFAC, stating, “OFAC must see Tornado Cash for what it is: a tool that can be used by anyone.

Rather than sanctioning a tool with a lawful purpose, OFAC should remain focused on the bad actors that misuse such tools.” The amicus brief from the Blockchain Association proposed that OFAC should adhere to proper legal procedures by seeking approval from Congress to ban crypto mixers like Tornado Cash.

The argument put forth is, “The proper remedy is to seek legislation from Congress that would provide supplemental authority in the uniquely decentralized digital asset context – not to improperly stretch its existing authorities. Such a power-grab would be a slippery slope that could threaten all manner of internet-based tools that have heretofore been freely available.”

This legal confrontation is emblematic of the broader industry debate surrounding the regulation of privacy-focused tools within the cryptocurrency space. In August 2022, the U.S. Treasury Department added over 40 cryptocurrency addresses allegedly linked to Tornado Cash to the Specially Designated Nationals list of OFAC.

The outcome of this case holds significant implications for the regulatory landscape of the cryptocurrency industry, particularly as the Blockchain Association advocates for a more targeted and nuanced regulatory approach.

It’s pertinent to note that in a related development in August 2023, the Blockchain Association (BA) and Crypto Council for Innovation (CCI) jointly filed an amicus brief with the Chamber of Progress and Consumer Technology Association in the Securities and Exchange Commission’s enforcement action against Coinbase.

The joint brief raised concerns about the SEC’s interpretation of “investment contract” and its strategy of enforcing regulations to assert jurisdiction over nearly all digital assets, emphasizing the necessity of congressional action instead of relying solely on the SEC.

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Saniya Raahath
Saniya Raahath

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