A federal appeals court in the US has ruled that the country's treasury department overstepped its authority by sanctioning Tornado Cash, a privacy tool built on the Ethereum blockchain and used to conceal digital asset ownership. The software first came in news in 2022 when the US Treasury Department said a North Korean hackers used it to launder more than $600 million of crypto assets, as per a report in Axios. In its ruling, the 5th Circuit Court of Appeals in New Orleans sided with six Tornado Cash users, who argued that the software cannot be sanctioned under the US law.
The ruling has been welcomed by X users, saying it is a win for privacy.
"Privacy wins. Today the Fifth Circuit held that @USTreasury's sanctions against Tornado Cash smart contracts are unlawful. This is a historic win for crypto and all who cares about defending liberty. @coinbase is proud to have helped lead this important challenge," commented Paul, Chief Legal Officer at Coinbase.
"I don't think people understand how big of a ruling this is. The court is saying that immutable smart contracts are not subject to sanctions since they're not owned by anyone. The US legal system is finally acknowledging that decentralized protocols are a new type of infrastructure in the world," said another X user.
What is Tornado Cash?
It is a crypto transaction privacy programme that allows users to deposit several types of cryptocurrency into a shared pool. It provides privacy in a sense that users' use of a set of funds in one instance cannot be linked with another.
Tornado Cash ensures anonymity by allowing token withdrawals from one address while accepting token deposits from another.
The software continues to be used, though its popularity has taken a hit in recent years.
Link with North Korean hackers
In August 2022, Treasury Office sanctioned all the addresses associated with tornado Cash, forbidding US citizens to use it in any way.
A month later, the treasury department was sued by users of Tornado Cash, accusing it of overstepping its authority, said the Axios report.
The users initially lost in district court, but the latest ruling reverses that.
