Immutable Smart Contracts Defeat SEC in Court
In today's sensational news, immutable smart contracts have defeated the Treasury Department in court, as a U.S. court announced that the sanctions imposed by the U.S. Securities and Exchange Commission (SEC) against the cryptocurrency mixer Tornado Cash were unlawful. This ruling overturned a previous decision and shocked the cryptocurrency industry, significantly impacting the future development of decentralized finance.
The announcement stated, "The immutable smart contracts involved in this appeal are not property because they cannot be owned. Over a thousand volunteers participated in a trusted setup ceremony to irrevocably remove anyone's option to update, delete, or otherwise control these lines of code," while also recognizing Tornado Cash's immutable smart contracts, "no one can 'exclude' anyone from using the Tornado Cash smart contracts."
In short, regardless of how OFAC designates Tornado Cash, the immutable smart contracts will continue to operate. Furthermore, since the software will continue to run regardless of any sanctions, blockchain technology "allows peer-to-peer transfers… without the recipient's consent to transfer."
However, the victory in this appeal does not free TORN founder Roman, as the Department of Justice stated that the services operated by Roman violated sanction regulations, illegally transferred funds, and facilitated money laundering, which does not change these charges.
The History of the Tornado Cash Sanction Incident
Tornado Cash is a decentralized mixing service based on Ethereum, primarily designed to mix users' deposits together through smart contracts and then redistribute them, making the source of funds untraceable. Since its launch in 2019, Tornado Cash has been widely welcomed in the cryptocurrency community for its privacy protection features. This anonymity has also attracted the attention of regulators.
In August 2022, the U.S. Treasury's Office of Foreign Assets Control (OFAC) announced sanctions against Tornado Cash, accusing it of helping hackers and criminals launder money, involving amounts as high as $7 billion. OFAC pointed out that this included activities by the North Korean-linked hacker group Lazarus Group laundering funds through Tornado Cash. Subsequently, Tornado Cash's official website was shut down, its code repository was removed from GitHub, and the GitHub account of one of its co-founders, Roman Semenov, was suspended.
This sanction triggered a strong reaction from the cryptocurrency community. Many users and supporters believed that the sanctions were unfair and posed a threat to innovation and privacy rights in the cryptocurrency industry. Users of Tornado Cash, with the support of Coinbase, filed a lawsuit to overturn the sanctions.
After a lengthy legal process, today, three judges from the U.S. Fifth Circuit Court of Appeals ruled that OFAC's sanctions exceeded its authority, stating that Tornado Cash's smart contracts do not constitute "property" and therefore cannot be sanctioned under the International Emergency Economic Powers Act (IEEPA). This ruling overturned the previous decision and marked a significant victory for cryptocurrency privacy rights.
Ripple's Chief Legal Officer Stuart commented on the ruling, stating, "Regulators do not make laws; they enforce written regulations. If they want more power, only a Congress accountable to the people can grant them that power."
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Victory for Privacy, Victory for DeFi
This court ruling is not only a victory for Tornado Cash users but also a significant victory for the entire decentralized finance sector. The ruling confirms the legal status of smart contracts as open-source code, emphasizing that they do not belong to any individual or entity as "property" and therefore cannot be arbitrarily sanctioned. This ruling provides greater legal protection for cryptocurrencies and decentralized applications, encouraging technological innovation.
As digitalization accelerates, users' demand for privacy is increasing. Tools like Tornado Cash provide users with the possibility of anonymous transactions, allowing them to better protect their personal privacy.
Since the announcement, the TORN token has surged, increasing by as much as 422% within 24 hours, now reported at $133.29.
However, this does not mean that Tornado Cash is completely free from legal risks. Consensys lawyer Bill Hughes pointed out that this ruling only applies to smart contracts without administrator keys, and other aspects may still face legal challenges. Regulators may still take action against other aspects of Tornado Cash.
Conclusion
This ruling gives new life to Tornado Cash and brings positive implications for the future of the decentralized finance industry. The struggle between regulation and technology has entered a new phase, and finding a balance between protecting privacy and preventing crime will be a key issue for the future development of decentralized finance. The U.S. court's ruling may just be the beginning of this complex process.
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