OFAC “Overstepped its Legal Authority” With Tornado Cash Ban

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  • Coin Center’s Jerry Brito and Peter van Valkenburgh have claimed that OFAC “overstepped its legal authority” over the Tornado Cash affair
  • The pair argue that Tornado Cash isn’t a sanctionable entity, and OFAC’s authority doesn’t extend to sanctioning code
  • Coin Center is considering a legal challenge under freedom of speech grounds

Coin Center Executive Director Jerry Brito and Research Director Peter van Valkenburgh have claimed that the Treasury Department’s Office of Foreign Assets Control (OFAC) “overstepped its legal authority” when it added Tornado Cash to its Specially Designated Nationals And Blocked Persons (SDN) List. The blocking of Tornado Cash, and 44 associated Ethereum addresses, has sparked a community-wide debate over the legality of the move and the potential ramifications, with Coin Center even threatening legal action.

OFAC Kicked the Hornets’ Nest

OFAC doesn’t seem to have realised the hornets’ nest that it was about to kick when it sanctioned Tornado Cash, citing use by North Korean hackers as its reason for doing so. However, given that Tornado Cash is a DAO rather than company, this means that the U.S. Treasury is suggesting that it has jurisdiction over code, something that is protected by First Amendment rights.

To this end, Brito and van Valkenburgh penned a lengthy argument against this yesterday, saying that the move “potentially violates constitutional rights to due process and free speech”, adding that it is looking to see if it can challenge the decision in court. The reason for this is that, Brito and van Valkenburgh argue, innocent Americans are being harmed by the denial of the Tornado Cash service, let alone the fact that OFAC can’t legislate against code.

Coin Center Exploring Legal Avenues

The piece argues that the entity that was censored, what it calls the ‘Tornado Cash Entity’, is no longer in control of the code – the code is out there, and no one owns it, so who is there to sanction? Who will pay the fine if one was ever levied?

This, among other arguments, is why Coin Center is “exploring with counsel a court challenge to this action” as well as filing for a licence to allow users of Tornado Cash who still have funds trapped on the platform to get them back.