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<blockquote style="position: relative; padding-left: 55px;"><section><a href="https://hachyderm.io/users/molly0xfff/statuses/113602866410141744">Molly White (molly0xfff@hachyderm.io)'s status on Friday, 06-Dec-2024 08:43:00 JST</a><a href="https://hachyderm.io/@molly0xfff" title="molly0xfff@hachyderm.io"><img src="https://gnusocial.jp/avatar/34789-48-20230824095227.webp" width="48" height="48" alt="Molly White" style="position: absolute; left: 0; top: 0;">Molly White</a><div><a href="https://hachyderm.io/@molly0xfff/113602857822862602" rel="in-reply-to">in reply to</a></div></section><article><p>The Fifth Circuit overturned some sanctions against Tornado Cash, determining that truly immutable smart contracts cannot be sanctioned. I’m not sure this will meaningfully change the effort to sanction the mixer, and it may actually make things worse for blockchain operators.</p><p><a href="https://hachyderm.io/tags/crypto" rel="tag">#crypto</a> <a href="https://hachyderm.io/tags/cryptocurrency" rel="tag">#cryptocurrency</a> <a href="https://hachyderm.io/tags/TornadoCash" rel="tag">#TornadoCash</a></p></article><footer><a rel="bookmark" href="https://gnusocial.jp/conversation/4131775#notice-8074737">In conversation</a><time datetime="2024-12-06T08:43:00+09:00" title="Friday, 06-Dec-2024 08:43:00 JST">about 6 months ago</time> <span>from <span><a href="https://hachyderm.io/@molly0xfff/113602866410141744" rel="external" title="Sent from hachyderm.io via ActivityPub">hachyderm.io</a></span></span><a href="https://hachyderm.io/@molly0xfff/113602866410141744">permalink</a><h4>Attachments</h4><ol><li><label><a rel="external" href="https://gnusocial.jp/attachment/3639274">A Fifth Circuit ruling overturned the sanctions against Tornado Cash cryptocurrency mixer smart contracts, imposed by the United States Treasury Department’s Office of Foreign Assets Control (OFAC) in August 2022. The court opined that the smart contracts that comprise the Tornado Cash cryptocurrency tumbler are "not property because they are not capable of being owned", and thus cannot be sanctioned by OFAC.16 The ruling was carefully limited to the specific Tornado Cash smart contracts, which underwent a trusted setup ceremony involving 1,100 participants to make around twenty of the service’s smart contracts permanently immutable.c Unlike many smart contracts, these Tornado Cash contracts truly cannot be modified or controlled in any way (short of, say, changing how Ethereum works), and the court decided that this means they cannot be sanctioned.This verdict has been celebrated by crypto enthusiasts who felt that OFAC’s sanctions were an overreach, but if it is a victory, I’m not sure it’s a decisive one. For one, I’m not really sure it’s a “crypto” vs. “anti-crypto” fight to begin with, though many in the crypto industry have certainly portrayed it as one. It seems to me that the Fifth Circuit is saying that OFAC can’t sanction a program — that is, the lines of code telling a computer how to perform an action — and that you have to sanction a service that runs that program, or perhaps more precisely: an individual or business that runs a service that runs the program.</a></label><br><a href="https://media.hachyderm.io/media_attachments/files/113/602/862/795/723/636/original/7698a1079307e050.png" rel="external">https://media.hachyderm.io/media_attachments/files/113/602/862/795/723/636/original/7698a1079307e050.png</a></li><li><label><a rel="external" href="https://gnusocial.jp/attachment/3639275">But “you can’t sanction this Tornado Cash smart contract” and “you can’t sanction Tornado Cash” are two very different statements, and the Fifth Circuit has said the former, not the latter. I suspect that OFAC will continue to pursue sanctions against Tornado Cash, and the question then becomes how those sanctions are imposed. I think one very real possibility is that OFAC says, “fine, if we can’t sanction the code, we’ll sanction the operators of the computers that run the code” — that is, the relays and validators that accept transactions involving the Tornado Cash service. Already, more than half of blocks added to the Ethereum blockchain are being created with relays that censor transactions involving sanctioned wallet addresses,17 by validators that have taken a cautious approach when it comes to the rather muddy water around blockchain sanctions and who can be prosecuted for violating them. Further development of these legal theories could stand to make it much more challenging, not to mention legally risky, to run an Ethereum validator.There’s also, of course, the possibility that the Treasury Department will look to Congress to clarify its authority when it comes to smart contracts. While this is certainly a crypto-friendly Congress, I’m not sure if it’s so crypto friendly that it will effectively greenlight sanctions violations so long as they happen via cryptocurrency rails. (But hey, I’ve been wrong before.)</a></label><br><a href="https://media.hachyderm.io/media_attachments/files/113/602/865/008/981/501/original/b8d5d5e91f086447.png" rel="external">https://media.hachyderm.io/media_attachments/files/113/602/865/008/981/501/original/b8d5d5e91f086447.png</a></li></ol></footer></blockquote>

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Molly White (molly0xfff@hachyderm.io)'s status on Friday, 06-Dec-2024 08:43:00 JST Molly White
in reply to
The Fifth Circuit overturned some sanctions against Tornado Cash, determining that truly immutable smart contracts cannot be sanctioned. I’m not sure this will meaningfully change the effort to sanction the mixer, and it may actually make things worse for blockchain operators.
#crypto #cryptocurrency #TornadoCash
In conversationabout 6 months ago from hachyderm.iopermalink
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1. A Fifth Circuit ruling overturned the sanctions against Tornado Cash cryptocurrency mixer smart contracts, imposed by the United States Treasury Department’s Office of Foreign Assets Control (OFAC) in August 2022. The court opined that the smart contracts that comprise the Tornado Cash cryptocurrency tumbler are "not property because they are not capable of being owned", and thus cannot be sanctioned by OFAC.16 The ruling was carefully limited to the specific Tornado Cash smart contracts, which underwent a trusted setup ceremony involving 1,100 participants to make around twenty of the service’s smart contracts permanently immutable.c Unlike many smart contracts, these Tornado Cash contracts truly cannot be modified or controlled in any way (short of, say, changing how Ethereum works), and the court decided that this means they cannot be sanctioned. This verdict has been celebrated by crypto enthusiasts who felt that OFAC’s sanctions were an overreach, but if it is a victory, I’m not sure it’s a decisive one. For one, I’m not really sure it’s a “crypto” vs. “anti-crypto” fight to begin with, though many in the crypto industry have certainly portrayed it as one. It seems to me that the Fifth Circuit is saying that OFAC can’t sanction a program — that is, the lines of code telling a computer how to perform an action — and that you have to sanction a service that runs that program, or perhaps more precisely: an individual or business that runs a service that runs the program.
  https://media.hachyderm.io/media_attachments/files/113/602/862/795/723/636/original/7698a1079307e050.png
2. But “you can’t sanction this Tornado Cash smart contract” and “you can’t sanction Tornado Cash” are two very different statements, and the Fifth Circuit has said the former, not the latter. I suspect that OFAC will continue to pursue sanctions against Tornado Cash, and the question then becomes how those sanctions are imposed. I think one very real possibility is that OFAC says, “fine, if we can’t sanction the code, we’ll sanction the operators of the computers that run the code” — that is, the relays and validators that accept transactions involving the Tornado Cash service. Already, more than half of blocks added to the Ethereum blockchain are being created with relays that censor transactions involving sanctioned wallet addresses,17 by validators that have taken a cautious approach when it comes to the rather muddy water around blockchain sanctions and who can be prosecuted for violating them. Further development of these legal theories could stand to make it much more challenging, not to mention legally risky, to run an Ethereum validator. There’s also, of course, the possibility that the Treasury Department will look to Congress to clarify its authority when it comes to smart contracts. While this is certainly a crypto-friendly Congress, I’m not sure if it’s so crypto friendly that it will effectively greenlight sanctions violations so long as they happen via cryptocurrency rails. (But hey, I’ve been wrong before.)
  https://media.hachyderm.io/media_attachments/files/113/602/865/008/981/501/original/b8d5d5e91f086447.png

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