Tl;dr: Coinbase is funding a lawsuit brought by six people challenging the U.S. Treasury Department’s sanctions of the Tornado Cash smart contracts and asking the Court to remove them from the U.S. sanctions list. The sanctions exceed Treasury’s authority, harm innocent people, remove privacy and security options for crypto users, and stifle innovation.
By Brian Armstrong, CEO
Today we’re announcing that Coinbase is funding a lawsuit brought by six people challenging the United States Treasury Department’s sanctions of the Tornado Cash smart contracts and asking the Court to remove them from the U.S. sanctions list.
Tornado Cash is an open source piece of software running on the Ethereum blockchain that preserves privacy by allowing users to deposit assets from one crypto address and withdraw them using a different crypto address.
Last month, Treasury sanctioned the Tornado Cash software because it was being used by criminals — including North Korean hackers. We have no issue with the Treasury sanctioning bad actors and we take a hard stance against unlawful behavior. But in this case, Treasury went much further and took the unprecedented step of sanctioning an entire technology instead of specific individuals. The problem here is twofold: (1) there are legitimate applications for this type of technology and as a result of these sanctions, many innocent users now have their funds trapped and have lost access to a critical privacy tool, and (2) we believe the Treasury exceeded its authority, given by Congress, by sanctioning a technology.
At Coinbase, we’ve been fighting illicit activity since the very beginning, and while we share Treasury’s commitment to fighting crime, we believe this action harms innocent people and threatens the future of decentralized finance (DeFi) and web3 specifically.
Treasury used a hammer instead of a scalpel
The nature of the blockchain — where every transaction is public — makes crypto more secure. But it can also create privacy concerns. If you receive your salary in crypto, for example, you might not want the world to know how much money you make, or how you choose to spend it.
That’s why the individuals we’re supporting in this case used Tornado Cash in the first place:
- One person used Tornado Cash to anonymously donate money to Ukraine. Afterwards, his wallet received potentially malicious air drops. But because he anonymized his crypto before donating, he avoided attacks against his personal accounts. He…
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