Tornado Cash bans should be lifted, according to a Coinbase-backed proposal

Simar Marwaha
Simar Marwaha
Published on May 25, 2023 09:16 AM

Paul Grewal, summed up the arguments shortly after in a Twitter conversation, asserting that the government is violating the language of the law by seeking to criminalise open-source software using the property sanctions act.

Coinbase: Tornado Cash bans should be lifted
Source: Medium

Six individuals have recently presented four crucial points in favor of their request to reject the Treasury Department's decision to penalize Tornado Cash, a cryptocurrency mixer.

The people contend that the issue was one of government overreach and a violation of First Amendment rights in a May 24 filing in support of a previous petition for partial summary judgment. They claim that the case was not about creating specific regulations for new technologies.

Coinbase-backed proposal: Tornado Cash bans should be lifted

Six people have made four vital arguments in support of their plea to overturn the Treasury Department's decision to sanction cryptocurrency mixer Tornado Cash. In a May 24 filing in support of an earlier motion for partial summary judgment, the people claim that the problem was one of government overreach and a violation of First Amendment rights. They contend that the case wasn't about establishing certain rules for emerging technology.

Paul Grewal, the chief legal officer of Coinbase, summed up the points shortly after in a Twitter thread, claiming that the government is trying to exploit the property sanctions act to outlaw open-source software, which is against the letter of the law.

The case against the U.S. Department of Treasury was initially launched on September 8, 2022, and Coinbase has supported it. Joseph Van Loon, Tyler Almeida, Alexander Fisher, Preston Van Loon, Kevin Vitale, and Nate Welch are the six plaintiffs who filed the lawsuit. Most of the group had previously engaged with Tornado Cash, according to the affidavit.

Four main arguments

Firstly, the first of these reasons relate to the Treasury's effort to designate Tornado Cash as a foreign "national" by referring to it as an unincorporated organization, which it must do to support its action.

The plaintiffs drew attention to the Treasury's definition of "Tornado Cash," which encompasses all TORN token owners regardless of whether they have banded together for any given objective. According to the plaintiffs, based on the Treasury's own standards, Tornado Cash cannot be categorised as an unincorporated organisation as a result of this definition.

Second argument states that as property only refers to things that may be owned, Tornado Cash's open-source smart contracts cannot be regarded as property.

The final defence put up by the plaintiff contends that even if these smart contracts were constituted property, no Tornado Cash business has any "interest" in them, hence the Treasury lacks the ability to impose sanctions.

The Treasury cannot justify punishing Tornado Cash by saying that users should exercise their First Amendment rights somewhere else, even if it were within its legal rights to do so. This is the Treasury's final argument.

On August 8, 2022—just one month after the user interface code was made available for public use—the Treasury first imposed sanctions on a handful of addresses connected with Tornado Cash.




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