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U.S. Sanction of Tornado Cash curtails the rights of all Americans
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The cryptocurrency world was rocked this week as the U.S. Treasury Department’s Office of Foreign Asset Control (OFAC) announced it had added “Tornado Cash” and several related Ethereum addresses to the Specially Designated Nationals And Blocked Persons list. In short, they attempted to sanction the Tornado Cash smart contract itself in addition to persons connected with Tornado Cash.
This is a first for OFAC, which typically sanctions people or companies. We have never seen autonomous decentralized code added to the list before. This is a hair-raising precedent that has already been followed by the deletion of open source code from hosting providers and the arrest of at least one developer.
Soon after the news came out we published a preliminary analysis of the situation: U.S. Treasury sanction of privacy tools places sweeping restrictions on all Americans.
How is adding Tornado.cash to the SDN list different from past OFAC actions? A smart contract is a robot, not a person. It is software that resides on the Ethereum blockchain. If a contract is credibly decentralized then the original authors of that contract could be hit by a bus and the service would continue to work. As such, today’s action does not seem so much a sanction against a person or entity with agency. It appears, instead, to be the sanctioning of a tool that is neutral in character and that can be put to good or bad uses like any other technology. It is not any specific bad actor who is being sanctioned, but instead it is all Americans who may wish to use this automated tool in order to protect their own privacy while transacting online who are having their liberty curtailed without the benefit of any due process.
Our director of research happened to be speaking at a conference later that day. He used the opportunity to give another overview of the situation and deeper breakdown of the legal issues at play.
The full video is roughly 30 minutes and available here. Here’s a clip:
Our views on the misguided nature of sanctioning decentralized applications and the many issues that raises made it into much of the media coverage of the issue:
Politico: The tornado tearing through crypto
The Washington Post: U.S. bars Americans from using crypto service Tornado Cash
Coin Center will continue to stand up for developers and users of privacy preserving technologies. Next week we will publish a deeper legal analysis of the action. Behind the scenes we are coordinating with community members who might want to challenge this action from the Treasury Department.
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