Coin Center - a crypto policy not-for-profit organisation - has brought proceedings against the US Treasury Department's Office of Foreign Asset Control (OFAC). Coin Center claims that OFAC unlawfully overreached its authority when it criminalised interactions with Tornado Cash - a privacy enabling Ethereum coin mixing facility which had been used by bad actors.
The action follows Coin Center's threat raised immediately after the ban that it would challenge the OFAC decision in Court. Coin Center's Executive Director, Jerry Brito, said on Twitter:
Not only are we fighting for privacy rights, but if this precedent is allowed to stand, OFAC could add entire protocols like Bitcoin or Ethereum to the sanctions list in future, thus immediately banning them without any public process whatsoever. This can't go unchallenged.
At the time of the ban, OFAC argued that Tornado Cash had been used to launder money by bad faith actors, including North Korean-sponsored hacking organisation, Lazarus Group.
By banning Tornado Cash, the US Treasury has been accused of 'declaring war' on privacy. Coin Center made the following observations in a press release on their website:
Privacy is not the default on Ethereum. If you do your job on Ethereum, your co-workers can see your salary. If you donate to a political cause on Ethereum, the enemies of your cause can see your contribution. If you are a celebrity on Ethereum, your fans see not just your publicized activities but also your private personal accounts. Privacy is normal for a salaried employee, a charitable donor, even a celebrity, but privacy is not normal if you do these things on Ethereum unless you use Tornado Cash.
Of course there are other privacy centric mixers which are not subject to sanctions, but the action by OFAC, which is an administrative decision, and not a policy or judicial decision, could extend easily to other privacy enabling software.
Coin Center's action against OFAC is similar to the lawsuit filed against OFAC by Coinbase last month, alleging OFAC's action in banning an unaffiliated piece of open-source software overstepped the law. The claim is technical but OFAC is entitled to act against persons and entities and the core argument is that a piece of software is not a person or entity.
Coin Center's action, argues that OFAC's powers are given to it by the International Emergency Economic Powers Act only by allow OFAC to block domestic users from:
transacting with a foreign person or majority foreign entity or the property of that person or entity.
Coin Center are making the matter squarely about privacy, observing:
Privacy is normal, and when we win our lawsuit, using Tornado Cash will be normal again.
If Coinbase or Coin Center prevail in their actions, the victory will be seen as a substantial win for the privacy rights of people, as well as giving more confidence to American citizens to use privacy tools.