U.S Treasury Hit With Second Lawsuit For Tornado Cash Sanctions

  • Crypto non-profit group Coin Center is suing the U.S Treasury Department for sanctioning Tornado Cash.
  • The lawsuit alleges that the Treasury overstepped its authority. 
  • Coin Center is seeking the delisting of Tornado Cash from sanctions in the interest of user privacy. 
  • This is the second lawsuit against the Treasury over the ban on Tornado cash.

Coin Center, a Washington D.C based non-profit crypto think tank, has filed a lawsuit against the U.S Treasury Department for sanctioning Tornado Cash, the Ethereum-based transaction mixer.

As per the lawsuit, which also names the Office of Foreign Assets Control (OFAC) as a defendant, the Treasury does not have the statutory or regulatory authority to impose such a ban on the mixer service. 

The need to challenge Tornado Cash’s ban

Jerry Brito, executive director of Coin Center, took to Twitter to explain the implications of the Treasury’s actions and the need to challenge them. 

 “Not only are we fighting for privacy rights, but if this precedent is allowed to stand, OFAC could add entire protocols like Bitcoin or Ethereum to the sanctions list in future, thus immediately banning them without any public process whatsoever. This can’t go unchallenged.” Brito stated.

The lawsuit has demanded that all sanctions against Tornado Cash be removed so that American citizens can continue to protect their privacy while transacting via Ethereum. 

Coin Center’s lawsuit comes a month after Coinbase announced that it was funding a lawsuit against the Treasury Department for imposing sanctions on Tornado Cash. 

The lawsuit, backed by Coinbase, made similar allegations against the Treasury while demanding that the mixer service be removed from the U.S sanctions list.

Far-reaching implications

Blockchain analytics firm Chainalysis published a report in August outlining the implications of the sanctions. The report explained how the Treasury’s ban had raised compliance challenges for DeFi platforms, stablecoin issuers, staking pools, etc. 

In the aftermath of the sanctions, several people found their funds frozen on the platform due to compliance measures carried out by firms such as Circle, the firm behind USD Coin. 

These lawsuits are not isolated to Tornado Cash. These are landmark cases, and their verdicts will set critical precedents regarding regulations for the broader crypto industry.