A federal appeals court has ruled that the U.S. Treasury Department overstepped its authority by sanctioning Tornado Cash, a cryptocurrency mixer used to conceal digital asset ownership, which was linked to North Korea’s hacking groups.
According to a Bloomberg report, the 5th Circuit Court of Appeals in New Orleans sided with six Tornado Cash users, who argued that the software itself cannot be sanctioned under current U.S. law.
The Treasury Department had targeted Tornado Cash in 2022, claiming it was used to launder over $7 billion, including $455 million stolen by North Korea’s Lazarus Group.
However, the court stated that existing laws only allow sanctions against property owned by foreign nationals or entities—not open-source software like Tornado Cash.
Circuit Judge Don Willett emphasized the importance of updating outdated laws to address modern technologies like crypto mixers. Until then, Tornado Cash’s privacy-focused smart contracts are not considered “property” that can be blocked.
Following the decision, the price of TORN, Tornado Cash’s token, surged by 450%, according to CoinMarketCap. Despite the ruling, Tornado Cash remains controversial, with one of its developers, Alexey Pertsev, sentenced in the Netherlands for laundering over $2 billion.
Coinbase, which supported the legal challenge, praised the decision. Paul Grewal, Coinbase’s chief legal officer, called it a win for privacy, arguing that sanctioning open-source technology harms innovation and exceeds Treasury’s authority.
The case will now return to a federal court in Austin for further review, continuing a debate over privacy and regulation in the crypto world.
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