A major court decision has been made: A US appeals court has overturned sanctions imposed by the Treasury Department on cryptocurrency mixer Tornado Cash in 2022. The court ruled that the department had exceeded its authority by sanctioning decentralized software, which cannot be considered “property” in the legal sense.

• The sanctions were imposed by the Office of Foreign Assets Control (OFAC) in 2022, accusing Tornado Cash of laundering more than $7 billion, including funds stolen by the North Korean hacker group Lazarus.
• Reuters Judge Don Willett noted that the self-executing smart contracts on which Tornado Cash is based cannot be considered property because they are not controlled and cannot be changed.
• The ruling was in favor of six Tornado Cash users, supported by cryptocurrency exchange Coinbase, who had challenged the legality of the sanctions.

Coinbase Chief Legal Officer Paul Grewal called the ruling "a historic victory for the crypto industry and the protection of freedom." He emphasized that sanctioning technology rather than individuals could stifle innovation and violate privacy rights.

The ruling could set an important precedent for the regulation of decentralized technologies and highlight the need to update the legal framework to accommodate the specifics of digital assets.