The Victory of Privacy Technology: Tornado Cash Sanctions Overturned

CN
11 days ago

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

The reason for the sanctions was the accusation that Tornado Cash was used for money laundering and illegal transactions. The specific measures included declaring the contract address of Tornado Cash illegal, and additionally, some addresses that had transactions with the contract address were also blacklisted.

At that time, this incident caused a huge uproar in the community, with some brave individuals, including Vitalik, boldly standing up to express strong dissatisfaction with the U.S. government's high-handed actions.

Of course, some top DeFi projects immediately followed the U.S. government's measures and actively cut ties with the sanctioned addresses.

At that time, there were also some ill-intentioned users who sent small transactions from blacklisted addresses to a large number of innocent addresses, deliberately trying to drag more innocents into the blame.

I specifically shared about this incident in an article.

Thinking about this decision made by the U.S. government, I felt that the possibility of a reversal was very slim. Therefore, I believed that this sanction was a significant blow to privacy protection.

I never expected that this matter would now have a major turnaround. With the efforts of a group of activists, including the legal department of Coinbase and Ethereum core developers, the U.S. Fifth Circuit Court recently announced that the Treasury's sanction measures were illegal.

ChainFeeds has a very good article analyzing this matter, and I will attach the link to that article at the end.

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

"The court believes that these smart contracts are decentralized, self-executing, and uncontrollable code, and should not be subject to sanctions."

"At the same time, the court pointed out that although technology may be abused, administrative agencies do not have the authority to expand the scope of sanctions beyond what is legally prescribed."

Regarding why the Treasury's sanctions exceeded its authority, the court stated:

"Because these immutable smart contracts do not constitute 'property' in either a common, colloquial sense or under OFAC's definition," the court concluded that "OFAC exceeded its statutory authority."

In my view, the court's ruling, to some extent, acknowledges the neutrality of technology, distinguishing between the technology itself and illegal activities.

Such a ruling vividly reflects the protection of technological innovation.

The most direct benefit from this matter is probably the token of Tornado Cash, but I believe the more profound impact lies in reopening the door for the development of privacy technology.

I remember reading about Vitalik's vision for the future of Ethereum a few years ago, where a significant part was to protect privacy using zero-knowledge proof-related technologies.

The original intention of this plan was, on one hand, to better protect personal privacy; on the other hand, it aimed for Ethereum to play a greater role in the commercial field, allowing both parties in a transaction to avoid leaking trade secrets due to transparent on-chain information.

I have always held great expectations for this plan.

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

I truly hope that this plan can be re-emphasized and substantively promoted moving forward.

In the ruling, the court repeatedly mentioned the immutable nature of smart contracts. This further highlights the importance of decentralization as a foundational layer of blockchain infrastructure.

This reminds me of Vitalik's vision when planning Ethereum 2.0, where he envisioned Ethereum being able to resist attacks from governments and withstand the destruction of a third world war.

Without such grand visions and extreme pursuits, Ethereum could not have gained recognition for the "immutability" of smart contracts within human legal systems.

This ruling also objectively pushes the U.S. to the forefront of privacy protection in the crypto ecosystem.

This ruling can be seen as a significant goodwill gesture towards privacy technology. If other countries encounter similar issues, the most lenient regulatory measures they could adopt would likely be similar. And if other countries' regulations become too strict, surpassing those of the U.S., then related companies and teams will certainly move to the U.S.

In summary, this ruling is of great significance for the development of privacy technology in the crypto ecosystem, but it is not only a victory for technology; it is also a victory for humanity's pursuit of freedom and privacy.

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

Reference link:

https://substack.chainfeeds.xyz/p/ofac-tornado-cash

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