Coinbase Is Battling Against The US Regarding The Tornado Cash Protocol

A group of litigants supported by Coinbase is suing the United States government. The objective is to lift the penalties imposed on the Tornado Cash protocol in August 2022, as these prevent US citizens and corporations from utilizing the cryptocurrency mixer.

The Tornado Cash system increases crypto users’ privacy. This does not sit well with the American government. This is why Tornado Cash has been prohibited by OFAC since 2022. As a result, US firms are barred from utilizing it, a move that has made Coinbase shiver since last year.

OFAC and Coinbase are Fighting over a Prominent Matter

The crypto sector will not yield to government coercion. A lawsuit was filed against the United States Office of Foreign Assets Control by Joseph Van Loon, Tyler Al-meida, Alexander Fisher, Preston Van Loon, Kevin Vitale, and Nate Welch. The defendants in the lawsuit are Treasury Secretary Janet Yellen and OFAC Director Andrea Gacki. According to the lawsuit, the plaintiffs are seeking partial summary judgment in the United States District Court of Texas, backed by the exchange Coinbase. They feel Tornado Cash’s punishments are unconstitutional.

In this scenario, two laws are at work. First, the International Emergency Economic Powers Act (IEEPA) and then the sanctions against North Korea. The government, according to the plaintiffs, cannot censure Tornado Cash since it is neither a national nor a foreign person but rather computer software. They further claim that the software’s smart contracts cannot be managed or owned by anybody. As a result, Tornado Cash’s punishments would be a violation of the First Amendment.

This Case of Coinbase might Become a Stepping Stone for Other Cryptocurrencies

According to the plaintiffs, if OFAC can penalize immutable, open-source software code, it may be able to restrict intangible conceptions that cannot be defined as property. As a result, it may impede the overall growth and development of the crypto business.

The protracted legal struggle shows the difficulties that authorities and cryptocurrency firms confront. They must establish a balance between consumer protection and the prevention of unlawful operations. As a result, the court’s verdict, in this case, will almost certainly have far-reaching consequences for the crypto industry. If the court rules in favor of the Coinbase-backed plaintiffs, it may embolden other cryptocurrency firms and people to fight punishments and restrictions that they feel are unjust or unreasonable.

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