- U.S. Treasury lifts Tornado Cash sanctions after blacklisting it in 2022 for laundering $7 billion.
- Coinbase CLO Paul Grewal criticizes the Treasury for sidestepping a court ruling on Tornado Cash.
- Legal uncertainties remain as Grewal warns of potential reimposition of Tornado Cash sanctions.
On Friday, the U.S. Treasury lifted sanctions on crypto mixer Tornado Cash, accused of laundering over $7 billion, including funds linked to North Korean hackers. The Treasury had blacklisted the platform in 2022, citing its role in laundering $455 million stolen by the Lazarus hacking group.
Coinbase CLO Criticizes Treasury’s Move
However, the decision has sparked strong criticism. Coinbase Chief Legal Officer (CLO) Paul Grewal publicly condemned the Treasury for its handling of Tornado Cash’s delisting. In a strongly worded X post, he argued that the Treasury is attempting to sidestep a final court ruling on the case, which undermines legal procedures.
Grewal asserted that the Treasury’s recent filing seeks to moot the need for a final judgment, claiming the case is no longer relevant after Tornado Cash’s removal from the Specially Designated Nationals (SDN) list. However, he pointed out that such a filing is only valid if the defendant can prove the issue won’t recur.
The Coinbase CLO highlighted past cases where sanctions were lifted, yet the cases remained open, enabling the government to reimpose sanctions at will. He stressed that the Treasury has not provided any assurance that Tornado Cash won’t be blacklisted again in the future.
Coinbase, Ethereum Foundation Support Tornado Cash
Grewal’s criticisms come amid an ongoing court battle. Users of Tornado Cash contested the Treasury’s action of adding the platform to the SDN list, claiming that its smart contract does not qualify as a property under the IEEPA because it is immutable.
The court sided with the users, ruling that Tornado Cash’s smart contract does not qualify as property under IEEPA. Despite the legal arguments aside, Grewal reproached the Treasury for not fully complying with the court order and for continuing to try and evade a legal resolution to the case.
Tornado Cash has gained plenty of attention from Coinbase and the Ethereum Foundation, who have been funding the legal defense of lead developer Alexey Pertsev. Other participants in the cryptocurrency market contend that the Treasury’s stance was too harsh and ungrounded.
The removal of sanctions from Tornado Cash marks a significant milestone in the ongoing potential regulation of crypto mixers. The uncertainty about the Treasury’s future actions, along with the legal ambiguity that still exists, might reimpose sanctions in the future, fueling the debate on the legal status of Tornado Cash.
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