Coinbase supports legal challenge against US govt sanctions on Tornado Cash

Coinbase has backed a legal challenge against the US government’s sanctions imposed on Tornado Cash (TC), a decentralized mixing protocol that allows users to conduct private transactions on the Ethereum blockchain. The plaintiffs, represented by the Electronic Frontier Foundation, have now filed a motion for summary judgment asking the court to reopen TC for all.

In response to the motion, the Chief Legal Officer of Coinbase, Paul Grewal, tweeted that the plaintiffs’ arguments are simple but powerful. He also stated that anytime privacy is given to everyone, there is a risk that privacy could be abused by anyone. However, the Constitution and laws of the country recognize that privacy should not be taken away from all because of the unlawful acts of a few.

The legal challenge is based on several arguments that question the government’s ability to sanction a non-person entity such as TC. The first argument is that the government cannot sanction TC because it is not a foreign national or person. The second argument is that the law only permits the government to sanction a person’s property, which is something that can be owned or controlled.

However, no one can control the 20 smart contracts at the core of the TC software. They function without human control, and if immutable open-source software code can be sanctioned, it is hard to see why the government can’t ban any intangible concepts.

The third argument is that even if an ownerless thing could somehow be considered property, these 20 smart contracts are not owned by any foreign national or sanctioned person, nor are they owned by people who hold a certain crypto token in their wallets. Finally, the plaintiffs argue that the sanctions violate the First Amendment and block thousands of law-abiding American citizens from using TC to engage in socially valuable speech.

One of the plaintiffs, who used TC to donate to the Ukrainian government after Russia’s invasion, is now hindered in expressing his views without TC’s protection from online reprisals. The plaintiffs argue that the government’s sanctions are not narrowly-tailored and block socially valuable speech, just because some bad actors also used TC.

This legal challenge raises important questions about the government’s ability to regulate decentralized technologies such as TC. It remains to be seen how the court will rule, but the outcome could have significant implications for the future of privacy and decentralization.

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