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Coinbase to Finance User’s Lawsuit Against Treasury Department for Tornado Cash Sanctions

2 mins
Updated by Ryan Boltman
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In Brief

  • Coinbase is sponsoring the lawsuit against the Treasury Department.
  • The Treasury Department banned and blacklisted a crypto mixer Tornado Cash as a matter of national security on Aug. 8.
  • Coinbase believes this ban sets a "dangers precedent" and wants to ensure the law distinguishes people and code.
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Coinbase is supporting a lawsuit against sanctioning an Ethereum-based crypto mixer, Tornado Cash.

The exchange is financing the lawsuit against the U.S. Treasury Department that currently features six plaintiffs, including several Coinbase employees because they believe it’s the right thing to do.

Coinbase Chief Legal Officer Paul Grewal explained to CNBC that sanctioning a platform built on a code is a controversial issue, and it goes way beyond just Tornado Cash.

“We saw this as a much larger problem. It sets a dangerous precedent — if this code can be designated without any limits imposed by law, any technology, any tool or system could be fair game.”

Treasury department blacklisting Tornado Cash Mixer

The Treasury Department blacklisted a crypto service Tornado Cash and blocked American users from using it on Aug. 8. Citing involvement with money laundering activities and matters of national security, the department added the platform to the Specially Designated Nationals list, which contains blacklisted individuals, entities and crypto addresses, automatically banning every American citizen from interacting with Tornado Cash and any Ethereum wallet connected to the service. 

A representative of the department claimed that the mixer had laundered over $7 billion worth of cryptocurrency.

“Tornado Cash has been the go-to mixer for cybercriminals looking to launder the proceeds of crime, as well as helping to enable hackers, including those currently under U.S. sanctions, to launder the proceeds of their cybercrimes by covering up the origin and transfer of this illicit virtual currency.”

But it’s unfair to punish any platform when it’s used for illegal reasons when it helps other users with absolutely legal requests, Coinbase insists.

“Each [of the plaintiffs] is an American who simply wants to engage in entirely lawful activity in private,” the lawsuit states.

One of the plaintiffs, a senior security risk analyst at the crypto exchange, said they used the service to donate to Ukraine, which is fighting against the Russian invasion, and wanted to do it anonymously out of fear of being targeted by hackers tied to Russia. 

Vitalik Buterin, a co-founder of Ethereum and a prominent figure in the crypto space, shared that he used Tornado Cash to donate to the Ukrainian cause as well. 

“I’ll out myself as someone who has used TC [Tornado Cash] to donate to [Ukraine],” Buterin wrote.

“It’s important that the law’s distinction between people and code be respected. If that disrespect is allowed to stand, there could be all sorts of other ways in which statutes are twisted and bent to apply to crypto in ways that they shouldn’t be,” added Grewal.

For Be[In]Crypto’s latest Bitcoin (BTC) analysis, click here.

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Catherine Ross-Mychka
Before joining be[in]crypto, Catherine worked as a deputy editor in chief at Cointelegraph, editor in chief at Currency.com, and crypto managing editor at Benzinga. She has hosted numerous video shows and international conferences, has moderated over 30 panels and interviewed over 60 crypto entrepreneurs and executives.
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