A victory for privacy technology: Tornado Cash sanctions overturned

Author: Daoshuo Blockchain

Two years ago, Ethereum, the most well-known privacy application in the entire crypto ecosystem, Tornado Cash, was sanctioned by the Office of Foreign Assets Control (OFAC) under the U.S. Treasury Department.

The reason for the sanctions was that Tornado Cash was accused of being used for money laundering and illegal transactions. The specific measures were to declare Tornado Cash's contract address illegal, and some addresses that had transactions with the contract address were also blacklisted.

At that time, this incident caused an uproar in the circle, and some warriors including Vitalik boldly stood up and expressed strong dissatisfaction with the U.S. government's arrogant approach.

Of course, some top DeFi projects immediately followed up the U.S. government's measures and took the initiative to quickly cut off from the sanctioned addresses.

At that time, some users with ulterior motives sent small transactions from blacklisted addresses to a large number of innocent addresses, deliberately poisoning more innocent people to take the blame.

I have shared this matter in a special article.

When I think that this is a decision made by the US government, I think the possibility of a subsequent reversal should be very small. Therefore, I think this sanction is a great blow to privacy protection.

I didn't expect that this matter has now taken a big turn. With the efforts of a group of activists including Coinbase's legal department and Ethereum core developers, the US Fifth Circuit Court recently declared the Treasury Department's sanctions illegal.

ChainFeeds has a very good article analyzing this matter, and a link to the article is attached at the end of the article.

There are several key points in the court's ruling:

"The court believes that these smart contracts are decentralized, self-running and uncontrollable codes and should not be listed as sanctions."

"At the same time, the court pointed out that although technology may be abused, the administrative agency has no right to expand the scope of sanctions beyond the law."

As to why the Treasury Department's sanctions exceeded its authority, the court believed:

"Because these immutable smart contracts do not constitute "property" in the ordinary and popular sense or under the definition of OFAC", the court believes that "OFAC has exceeded its statutory authority."

In my opinion, this ruling of the court recognizes the neutrality of technology to some extent and distinguishes the technology itself from illegal behavior.

Such a judgment fully reflects the protection of technological innovation.

The most direct benefit of this incident is probably the Tornado Cash token, but I think the more far-reaching impact is that it reopens the door to the development of privacy technology.

I remember reading Vitalik's plan for the future of Ethereum a few years ago, and one of the important parts was to protect privacy (using zero-knowledge proof related technologies).

I have always had great expectations for this plan.

However, this plan seems to have been rarely mentioned in recent years. I wonder if it is because the sanctions of the US government have interfered with the implementation of the plan?

I really hope that this plan can be re-valued and substantially promoted in the future.

In the judgment, the court repeatedly mentioned the tamper-proof characteristics of smart contracts. This further highlights the importance of the decentralized blockchain layer as the bottom infrastructure.

This reminds me of Vitalik's design when planning Ethereum 2.0, which envisioned that Ethereum should be able to resist attacks from the government and the destruction of World War III.

Without such a grand vision and extreme pursuit, Ethereum would not have made the human legal system recognize the "unalterability" of smart contracts.

This judgment has also objectively pushed the United States to the forefront of privacy protection in the crypto ecosystem.

This judgment can be said to have released great goodwill to privacy technology. If other countries encounter similar problems, the most relaxed regulatory measures that can be taken are probably the same. Once the supervision of other countries is too strict and exceeds that of the United States, the relevant companies and teams will definitely move to the United States.

In short, this judgment is of great significance to the development of privacy technology in the crypto ecosystem, but it is not only a technical victory, but also a victory for mankind's pursuit of freedom and privacy.

Of course, it is also a victory for the rule of law.