KeyTakeawys:
- U.S. Treasury defies court ruling on Tornado Cash sanctions, raising legal concerns.
- Coinbase’s Paul Grewal criticizes Treasury’s response to court’s decision on Tornado Cash.
- Treasury plans to review Tornado Cash listing, despite court ruling against sanctions.
Coinbase’s Chief Legal Officer, Paul Grewal, has raised concerns about the U.S. Treasury’s response to a recent court ruling on Tornado Cash sanctions. Grewal’s comments focus on the Treasury’s intention to defy parts of the Fifth Circuit Court of Appeals’ decision, which challenged the legality of the sanctions imposed on the cryptocurrency mixing service, Tornado Cash.
In December 2024, the Fifth Circuit Court of Appeals ruled that the U.S. Treasury Department’s sanctions on Tornado Cash were unlawful. Specifically, the court determined that the smart contracts associated with Tornado Cash did not qualify as “property” under the International Emergency Economic Powers Act (IEEPA). The court’s ruling was based on the fact that Tornado Cash’s smart contracts are immutable and cannot be altered, thereby exempting them from the sanctions typically placed on property.
Despite this ruling, the U.S. Treasury has signaled that it will not fully comply. Instead, it proposed a remand for further proceedings. The Treasury’s stance has been criticized by Coinbase’s Paul Grewal, who expressed disappointment over the agency’s response. Grewal argued that while the court had dismissed the Treasury’s authority to list Tornado Cash on the Specially Designated Nationals (SDN) list, the Treasury was still considering partial delisting.
Paul Grewal’s Criticism of the Treasury’s Response
In a series of tweets, Grewal questioned the Treasury’s intentions, noting that the agency’s refusal to fully abide by the court’s order indicated a disregard for the court’s legal interpretation.
Grewal emphasized that the Treasury’s actions, such as partially delisting Tornado Cash, would only prolong the legal issues that led to the case in the first place. He pointed out that the Treasury had assured that national security concerns would be addressed, but he maintained that the agency was overstepping its authority.
Grewal’s criticism points out ongoing concerns about the Treasury’s interpretation of its legal powers and its approach to cryptocurrency regulations. He highlighted that the Treasury’s actions could create further legal complications rather than resolve them.
Treasury’s Next Steps Amid Legal Uncertainty
Despite the court’s ruling, the U.S. Treasury remains determined to address the issue of Tornado Cash’s listing. The Treasury plans to review the matter with the Office of Foreign Assets Control (OFAC) and may remove Tornado Cash from the SDN list. However, no specific timeline has been provided for these actions.
While the Treasury moves forward with its proposed review, Coinbase and other plaintiffs in the case intend to submit a formal reply to ensure full compliance with the court’s decision. The ongoing legal battle between the U.S. Treasury and Tornado Cash’s supporters has raised important questions about the regulation of decentralized technologies and their intersection with U.S. sanctions laws.
