Tornado Cash Token Reaches Two-Year High After Court Overturns Treasury Sanctions

Court Decision Challenges Treasury’s Crypto Sanctions

Tornado Cash’s TORN token saw an explosive rise to a two-year high following a landmark decision by a U.S. federal appeals court. The ruling declared the U.S. Treasury’s sanctions against the privacy-focused crypto platform unlawful, signaling a critical moment for decentralized finance and open-source software. 

The price of TORN surged to $33, a staggering 1,000% increase in 24 hours, before stabilizing near $21 at the time of writing. Despite this rally, the token remains 96% below its all-time high of $436 recorded in February 2021, underscoring the volatility of the market.

Tornado Cash operates as an on-chain privacy tool, utilizing immutable smart contracts to facilitate anonymous crypto transactions. The U.S. Treasury’s Office of Foreign Assets Control (OFAC) sanctioned the platform in 2022, accusing it of facilitating over $7 billion in illicit transactions, including funds linked to North Korean hacking groups. 

However, the Nov. 26 court ruling stated that the Treasury exceeded its authority by targeting Tornado Cash’s immutable smart contracts. These contracts, rendered unalterable through a 2020 cryptographic setup involving over 1,000 contributors, function autonomously and lack an administrative entity. The judges concluded that such software does not meet the legal definition of property or services under the International Emergency Economic Powers Act (IEEPA).

In a significant rebuke to the Treasury, the court emphasized that Congress must update laws to accommodate emerging technologies like crypto-mixing tools if sanctions are to be legally applied. The ruling underscored that Tornado Cash’s smart contracts, governed by the community through the TORN token, cannot be blocked under current legislative frameworks. As the judges explained, these contracts operate independently, beyond the reach of traditional ownership or control.

The decision resonated deeply within the crypto community, with industry leaders heralding it as a victory for decentralized technologies and privacy rights. Paul Grewal, Coinbase’s Chief Legal Officer, called the ruling a safeguard for open-source innovation, cautioning against blanket restrictions that overreach congressional intent. Grewal stressed the importance of balancing crime prevention with the protection of decentralized protocols.

Bill Hughes, senior counsel at Consensys, noted that while the judgment protects Tornado Cash’s smart contracts, it does not render the entire platform immune from regulatory scrutiny. Hughes described the decision as a critical win, unlikely to face reversal by the Supreme Court. He highlighted its implications for future cases, particularly as courts continue to grapple with the intersection of open-source software and regulatory authority.

This ruling marks a pivotal moment in the evolving legal landscape of decentralized finance, underscoring the challenges regulators face in addressing emerging blockchain technologies.

This article has been refined and enhanced by ChatGPT.