Lawmaker Joins Voices Demanding Answers Over Tornado Cash Sanction

The crypto space expressed outrage in the wake of the Treasury Department’s sanctioning of the Ethereum coin mixer Tornado Cash and the arrest of one of its developers by Dutch financial authorities.

Treasury’s Office of Foreign Asset Control put Tornado Cash on its blacklist two weeks ago, a sanction normally reserved for rogue nations, drug kingpins, and “enemy” oligarchs. The designation essentially freezes Tornado Cash and all its associated addresses.

As we’ve written, the industry is outraged by this criminalization of open source code, which is supposed to be protected as free speech, and has rallied around opposing these actions. There have been protests in the Netherlands over the arrest of the developer, and now a sitting member of congress is demanding answers.  

U.S Congressman Tom Emmer (R-Minn.) asked the Treasury Department's Office of Foreign Asset Control (OFAC) to explain its sanctioning of privacy mixer Tornado Cash in an open letter tweeted Tuesday.

…In his letter Tuesday, Emmer said these sanctions looked like a "divergence from previous OFAC precedent" as some of the addresses added were tied to smart contracts and open-source software, rather than any specific person or entity.

"OFAC's sanctions on the virtual currency anonymizing software Tornado Cash in accordance with [an Executive Order] are the first sanctions issued against something other than an individual or entity determined 'to be responsible for or complicit in' malicious cyber-enabled activities that pose a threat on United States national security, foreign policy, economic health or financial stability," he wrote in the letter.

Another Treasury unit, the Financial Crimes Enforcement Network (FinCEN), has already drawn a distinction between service providers and software providers, saying only service providers – the operators of a mixer, in this example – are subject to Bank Secrecy Act rules.

Emmer directed several questions at OFAC, including which entity OFAC believed should have imposed controls on Tornado Cash blockchain contracts, how U.S. users can reclaim funds currently locked in the mixer, what people who receive funds should do, whether funds locked on Tornado Cash "through some mechanism or legal fiction" belong to an entity on the SDN list or to the person who put the funds in the mixer and a handful of others.

Perhaps most pertinent to much of the crypto sector, Emmer asked how Tornado Cash addresses could appeal their designation, given they are not people or entities.

His letter echoes comments made by the broader crypto industry, which saw the sanctions as a major concern. Coin Center, a crypto think tank, has threatened to bring a legal action against the Treasury Department, saying open source software should not be sanctioned.

We believe the industry needs to keep up pressure on this issue and demand answers before it sets a dangerous precedent antithetical to both common sense and long-standing federal case law.