The U.S. Treasury has recently lifted sanctions on the controversial cryptocurrency mixer Tornado Cash, which had previously been blocked on suspicion of assisting North Korea in money laundering.
While this reversal represents a significant development, Coinbase's Chief Legal Officer Paul Grewal warns that this action does not guarantee Tornado Cash's long-term freedom. According to his legal expertise, the U.S. Treasury has left open the possibility of imposing similar restrictions in the future.
Paul Grewal Mentions Potential Future Sanctions
The delisting decision follows months of legal disputes and criticism from the cryptocurrency community. The Treasury's original sanctions accused the mixing service of enabling illegal transactions, particularly those associated with North Korean hacking groups.
However, legal challenges increased scrutiny of the Treasury's actions and ultimately led to removing the restrictions. Nevertheless, Grewal argues that the Treasury's actions were an attempt to circumvent judicial authority, not an admission of wrongdoing.
He believes this reversal does not prevent the government from reimposing sanctions when deemed necessary.
"Power does not voluntarily relinquish itself. It gasps until it can do no more," Grewal wrote.
Grewal argues that the Treasury's withdrawal does not legally invalidate their existing claims. He cites the voluntary cessation principle, which states that a defendant's decision to discontinue challenged practices does not nullify the case unless it is proven that the practice will not be resumed.
The Coinbase exchange executive referenced past legal cases. In Friends of the Earth, Inc. v. Laidlaw Environmental Services (TOC), Inc., the Supreme Court ruled that voluntary withdrawal does not eliminate the possibility of future enforcement.
Grewal also cited the FBI v. Fikre case, where the court did not invalidate the case even though the FBI removed the plaintiff from the no-fly list, as there was no guarantee the plaintiff would not be relisted.
These legal precedents demonstrate why the Treasury's Tornado Cash sanctions removal does not ensure continuous protection.
"Here, the Treasury similarly removed the Tornado Cash entities from the SDN, but provided no assurance that they would not be relisted," Grewal argued.
Coinbase CLO Urges Final Ruling
Accordingly, Grewal is urging the district court to take decisive action to prevent potential Treasury abuse of power. He argues that the court should approve the plaintiff's partial summary judgment request, which would officially invalidate the Treasury's decision to sanction Tornado Cash.
"The U.S. Treasury's response to the Fifth Circuit's clear order on Tornado Cash has been a study in confusion. It's time for the district court to do what it was ordered to do months ago. The plaintiff's partial summary judgment request for Point 1 should be approved, and TC's designation should be deemed illegal and invalidated," Grewal explained.
The sanctions removal is a positive step for Tornado Cash users and the broader cryptocurrency community. However, the risk of regulatory measures being reimposed remains high. The legal battle is not over, and the outcome could set a crucial precedent for DeFi platforms and privacy-focused technologies.
Grewal and other industry advocates continue to push for a clear judicial ruling. The key objective is to prevent the Treasury from arbitrarily sanctioning Tornado Cash again. Until such a ruling is secured, Tornado Cash remains in an uncertain legal landscape.
