Market Analysis Report (13 Oct 2022)

Non-profit cryptocurrency think tank Coin Center has filed a lawsuit against the US Treasury Department’s Office of Foreign Asset Control (OFAC), claiming the agency unlawfully overreached its authority when it criminalized interacting with Ethereum-based coin mixing service Tornado Cash.

Coin Center’s lawsuit alleges the OFAC’s actions against Tornado Cash harmed Americans and their ability to transact privately on the Ethereum network. OFAC sanctioned Tonrado Cash in August, claiming North Korean hackers laundered hundreds of millions of dollars’ worth of crypto through it.

Around 20% of Tornado Cash’s overall transaction volume was tied to a hack or exploit, the federal government alleged. The crypto industry opposed the move, pointing to the fact that OFAC was sanctioning software and that Tornado Cash does not have a central operator.

Coin Center sees the lawsuit as critical for users’ right to privacy. The think tank’s executive director Jerry Brito said:

“Not only are we fighting for privacy rights, but if this precedent is allowed to stand, OFAC could add entire protocols like Bitcoin or Ethereum to the sanctions list in [the] future, thus immediately banning them without any public process whatsoever.”

The lawsuit joins a similar federal suit filed last month against the US Treasury by cryptocurrency exchange Coinbase. That one argued that OFAC overstepped the law by banning a piece of open software unaffiliated with a company.