Coinbase’s Chief Legal Officer Paul Grewal criticized the U.S. Treasury Department on Tuesday for disregarding a Fifth Circuit ruling requiring Tornado Cash’s removal from the sanctions list, citing the government’s incorrect application of sanctions laws to immutable smart contracts.
His comments follow a ruling by the U.S. Court of Appeals for the Fifth Circuit, which found that Tornado Cash’s immutable smart contracts do not qualify as “property” under the International Emergency Economic Powers Act (IEEPA).
In a post on X, Grewal argued that the Treasury is ignoring Congress’ directives and substituting its own interpretation of the law despite a decision from the Fifth Circuit Court of Appeals.
“In holding that the immutable smart contracts are not ‘property’ under IEEPA, the Fifth Circuit repeatedly distinguished them from the mutable smart contracts that also play a role in the Tornado Cash mixing service,” the court document stated.
Despite the court’s decision, Treasury officials stated in court documents that they would proceed with delisting Tornado Cash but requested additional time to do so.
The court determined that this classification meant Tornado Cash must be removed from the Treasury’s Specially Designated Nationals and Blocked Persons (SDN) list.
“More than 65 percent of North Korea’s dirty crypto went through mixers in 2021,” the department stated, adding that these illicit funds are used to finance weapons programs.
Officials cited concerns over cryptocurrency mixers being used to launder funds tied to cybercriminals, including North Korea’s Lazarus Group.
Meanwhile, Alexey Pertsev, the developer convicted in the Netherlands for laundering $1.2 billion through the platform, has been released under electronic monitoring as he prepares his appeal.
The legal fight over Tornado Cash is far from over. Despite a recent U.S. appeals court ruling that overturned sanctions against the protocol, the U.S. Treasury is pushing back, signaling more legal battles ahead.
While Pertsev fights for his freedom, Tornado Cash co-founders Roman Storm and Roman Semenov face separate legal troubles in the U.S. Storm, set for trial in September, has filed a motion to dismiss charges, arguing that Tornado Cash isn’t a financial institution.
However, prosecutors maintain that his role in the platform makes him responsible.
His case gained traction after the U.S. court’s ruling supported the argument that punishing developers for open-source code misuse is a dangerous ruling.