Coinbase argues to lift Tornado Cash Sanctions with compelling points

In a recent development, a motion backed by Coinbase, one of the leading cryptocurrency exchanges, has presented four compelling arguments to lift the sanctions imposed on Tornado Cash, a popular privacy-oriented decentralized application (dApp). The motion, submitted to the relevant regulatory authorities, aims to challenge the restrictions placed on Tornado Cash and highlights the potential benefits of this innovative platform. Let’s delve into the four key arguments put forth by the Coinbase-backed motion.

A group of six individuals aiming to reverse the United States Treasury’s decision to impose sanctions on crypto mixer Tornado Cash has recently presented four essential arguments in support of their motion.

Challenging government overreach: First Amendment Rights & emerging technology

In a filing on May 24 endorsing a previous motion for partial summary judgment, the individuals contend that the matter at hand is not centered around creating special regulations for emerging technology. Instead, they assert that it is a case of government overreach and a violation of First Amendment rights.

Following the submission, Coinbase’s chief legal officer, Paul Grewal, provided a summary of the arguments in a Twitter thread. Grewal asserted that the government’s intention to employ a property sanctions statute to prohibit open-source software contradicts the original purpose of the law.

Coinbase has thrown its support behind the lawsuit filed against the U.S. Department of Treasury, originally submitted on September 8, 2022. The group of six plaintiffs involved in the filing includes Joseph Van Loon, Tyler Almeida, Alexander Fisher, Preston Van Loon, Kevin Vitale, and Nate Welch. According to the filing, the majority of the individuals in the group had prior interactions with Tornado Cash.

The motion put forth four primary arguments

One of the arguments to lift Tornado Cash sanctions pertains to the Treasury’s effort to classify Tornado Cash as a foreign “national” in order to justify its actions by referring to it as an unincorporated association.

However, the plaintiffs pointed out that the Treasury’s definition of Tornado Cash encompasses all holders of the TORN token, regardless of whether they have united for any shared objective. According to the plaintiffs’ argument, this particular definition renders it impossible to classify Tornado Cash as an unincorporated association based on the criteria set forth by the Treasury itself.

The second argument pertains to the assertion that the open-source smart contracts that facilitate Tornado Cash’s functionality cannot be regarded as property since property strictly denotes something that can be owned.

Even in the scenario where these smart contracts were deemed as property, the third argument presented by the plaintiffs emphasizes that no Tornado Cash entity holds any “interest” in them. Consequently, the Treasury lacks the jurisdictional authority to impose sanctions on Tornado Cash.

The plaintiffs’ third argument highlights that, even if the smart contracts were considered property, no entity associated with Tornado Cash possesses any “interest” in them. As a result, the Treasury does not possess the necessary jurisdictional authority to enforce sanctions on Tornado Cash.

On August 8, 2022, the Treasury initially imposed sanctions on several addresses associated with Tornado Cash, which occurred merely a month after the user interface code was made publicly available as open source.

The Coinbase-backed motion seeking to lift the sanctions on Tornado Cash presents four compelling arguments. It challenges the Treasury’s classification of Tornado Cash as a foreign “national” and argues that open-source smart contracts cannot be considered property. Furthermore, the motion emphasizes that no Tornado Cash entity holds an “interest” in the smart contracts.

By raising these points, the motion aims to showcase the government’s overreach and potential violation of First Amendment rights. It remains to be seen how the regulatory authorities will respond, but this motion serves as a significant step toward initiating a constructive dialogue on the regulation of emerging technologies and safeguarding privacy rights in the cryptocurrency space.

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