Treasury Dept. Provides Senate Banking Committee Weak Rationale for Tornado Cash Sanction

Congressional testimony is one of the last places you want to look these days to find informed, intellectual discourse, but a hearing today before the Senate Banking Committee on cryptocurrency left us thunderstruck.

Treasury Department Assistant Secretary Elizabeth Rosenberg told committee members that the unprecedented blacklist sanction against Ethereum coin mixer Tornado Cash – sanctions against open source code – are justified because they could deter money launderers.

“That’s an effective avenue we can use in order to signal that we cannot tolerate money laundering,” said Rosenberg, who serves as assistant secretary for terrorist financing and financial crimes, a top U.S. sanctions policy position. “Whether that's for a Russian criminal actor, an Iranian, a North Korean or wherever they may come from.”

Rosenberg appeared before the Senate Banking Committee for a hearing titled “Tightening the Screws on Russia: Smart Sanctions, Economic Statecraft and Next Steps.” Rosenberg was responding to questions from Sen. Elizabeth Warren (D-Mass.), who ripped the crypto industry for “downplaying” and “lying” about the risks posed by crypto mixers.

“One thing I've learned over the past couple of years: When the crypto boosters cry the loudest, you're probably on to something.” Warren said. “If crypto has nothing to hide on money laundering for oligarchs or drug lords or tax evaders, then they shouldn't mind a little transparency.”

That sounds exactly like, “If you have nothing to hide, you shouldn’t mind us searching your property without a warrant.”

In August Treasury added Tornado Cash and associated addresses to its list of Specially Designated Nationals, freezing all assets attached and barring Americans from using the application.

Warren asked Rosenberg whether digital assets could be used by Russian oligarchs to avoid sanctions on Russia.

“Yes, senator. That’s possible,” Rosenberg said.

Which is ironic because, as we’ve written, one of the plaintiffs in Coinbase’s lawsuit against Treasury for the blacklisting specifically used Tornado Cash to protect pro-Ukraine donors.

Outlawing anything, much less source code, because it could be used in a crime or to evade sanctions is morally indefensible. Paper dollars could be used in a criminal transaction. We believe government should go after criminals, not ordinary, everyday tools that everyone uses.