Blockchain vs OFAC: Tornado Cash Sanctions Threaten Privacy and Innovation in Crypto World

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The ongoing lawsuit filed by think tank Coin Center against the Treasury Department and its sanctions watchdog, the Office of Foreign Asset Control (OFAC), has gained the support of the Blockchain Association. In an amicus brief, the Association has backed Coin Center’s claims that the Treasury Department’s sanctions against crypto mixer Tornado Cash not only harmed Americans, but also hindered their ability to transact privately using the Ethereum network.

Blockchain Association CEO, Kristin Smith, has stressed that Tornado Cash is merely a tool and punishing it for its potential to be used by bad actors contradicts the values the country was founded upon. According to Smith, regulatory actions should be targeted specifically at those who abuse the tool for illegal purposes, rather than the technology itself.

This comes after OFAC sanctioned Tornado Cash in August, alleging that North Korean hackers used the crypto mixer to launder hundreds of millions of dollars since its inception. The federal government claims that approximately 20% of Tornado Cash’s overall transaction volume is connected to one hack or another.

However, the crypto industry fervently opposes this move, pointing out that OFAC rarely sanctions software and that Tornado Cash does not have a central operator. Furthermore, the lawsuit argues that there are legitimate uses for individuals to employ privacy-enhancing tools like Tornado Cash. The OFAC’s sanctions against the privacy mixer, which operates by pooling funds to hide the sender of a transaction, effectively force these individuals to reveal their entire transaction history to anyone examining the network data.

Coin Center asserts that lifting the sanctions on the 20 Tornado Cash addresses would permit plaintiffs to carry out their legitimate activities with a degree of anonymity, use their preferred software tool without fear of penalties, and engage in essential expressive associations. They also claim that such relief would benefit the public interest by preventing harm to American Tornado Cash users, preserving Ethereum as a freedom and privacy-enhancing technology, and supporting the crucial economic sector that relies on Ethereum.

This debate raises important questions about the balance between technological innovation, personal privacy, and regulatory oversight. As the future of blockchain continues to unfold, it remains to be seen how authorities will address the potential risks while staying true to the principles of liberty and progress.

Source: Coindesk

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