Industry analysis reports and expert commentary

Fifth Circuit Reverses Tornado Cash Sanctions, Boosts Decentralized Crypto Innovation

Dec 3, 2024, 05:35 PM

The Fifth Circuit Court of Appeals has ruled that the U.S. Treasury Department's Office of Foreign Assets Control (OFAC) overstepped its authority by sanctioning Tornado Cash's immutable smart contracts. The decision in the case, Van Loon v. Department of Treasury, marks a significant legal victory for the cryptocurrency industry, emphasizing that immutable smart contracts cannot be 'owned' or 'controlled.' The ruling could have broader implications for decentralized crypto innovation, the regulation of decentralized technologies, and the application of the Howey Test's 'Efforts of Others' prong. Legal experts, including Coinbase's Paul Grewal and Leah Bressack, have highlighted the importance of the decision in protecting innovation in open-source technology beyond the crypto sector. The federal appeals court's decision effectively reverses the sanctions on Tornado Cash.