Coinbase is funding a lawsuit brought by six people challenging the U.S. Treasury Department’s sanctions of the Tornado Cash smart contracts and asking the Court to remove them from the U.S. sanctions list. Tornado Cash is an open source piece of software running on the Ethereum blockchain that preserves privacy by allowing users to deposit assets from one crypto address and withdraw them using a different crypto address. We have no issue with the Treasury sanctioning bad actors and we take a hard stance against unlawful behavior. But in this case, Treasury went much further and took the unprecedented step of sanctioning an entire technology instead of specific individuals. At Coinbase, we’ve been fighting illicit activity since the very beginning, and while we share Treasury’s commitment to fighting crime, we believe this action harms innocent people and threatens the future of decentralized finance (DeFi) and web3 specifically.
Treasury used a hammer instead of a scalpel
The nature of the blockchain — where every transaction is public — makes crypto more secure. If you receive your salary in crypto, for example, you might not want the world to know how much money you make, or how you choose to spend it. But because he anonymized his crypto before donating, he avoided attacks against his personal accounts. He used Tornado Cash to protect his personal security while transacting. A third person operates an Etherum staking business.
Treasury acted outside its authority
The second problem is that, while Treasury is allowed to sanction people (along with their property), Congress never gave it the power to sanction open source software. That’s why these plaintiffs are going to court to ask that this software be removed from the U.S. sanctions list.
Finally, sanctioning open-source code has a chilling effect on innovation. Right now, developers are worried that they could be held responsible for something they had nothing to do with, and no ability to control. It’s not enough to just say we disagree and sit on the sidelines. We will fully comply with the law while we await the court’s decision. But we’re hopeful that these sanctions will be reversed, allowing innocent crypto users to regain access to their funds and making it possible for anyone to use privacy tools to protect themselves.
Read Full Coinbase Blog Post: https://blog.coinbase.com/defending-privacy-in-crypto-e09db33dece8
