In a remarkable ruling, the U.S. Fifth Circuit Court of Appeals determined that Treasury’s Office of Foreign Assets Control (OFAC) overstepped its authority by sanctioning Tornado Cash’s immutable smart contracts. The decision reverses a lower court ruling, offering a significant win for privacy advocates and blockchain developers. Tornado Cash‘s smart contracts cannot be classified as “property” under the International Emergency Economic Powers Act (IEEPA).
Key Points
- Court Decision: The Fifth Circuit ruled that immutable smart contracts cannot be classified as “property” under existing law.
- Immutable Code: Over 1,000 contributors participated in a setup that permanently removed control over Tornado Cash’s code.
- Sanctions Overreach: The court declined to expand Congress’s definition of property to cover autonomous software.
- Implications: While immutable contracts are not “property,” Tornado Cash’s broader designation remains under review.
Short Narrative
The U.S. Fifth Circuit delivered a pivotal verdict on Tuesday, asserting that Tornado Cash’s immutable smart contracts cannot be classified as “property” subject to sanctions. Unlike services requiring human intervention, immutable smart contracts operate autonomously, beyond anyone’s control. The court criticized OFAC for stretching its authority, emphasizing that “legislating is Congress’s job—and Congress’s alone.”
This decision reverses a district court ruling and fuels ongoing debates about regulatory overreach in the crypto space. While the ruling is a win for privacy and blockchain innovation, Tornado Cash‘s overall sanctioned status remains unresolved.
Actionable Insight
The ruling sets a precedent for developers and legal teams building autonomous blockchain applications. However, entities relying on similar models should prepare for nuanced regulatory scrutiny, as sanctions targeting broader aspects of their operations may still apply.
Call for Information
Have insights on the implications of this ruling for blockchain innovation or Tornado Cash’s operations? Contact us at FinTelegram to share your expertise or provide additional intel.
