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US Lawmaker Emmer Asks Treasury Department to Explain Tornado Cash Sanctions


www.coindesk.com 23 August 2022 15:58, UTC
Reading time: ~2 m

U.S Congressman Tom Emmer (R-Minn.) asked the Treasury Department's Office of Foreign Asset Control (OFAC) to explain its sanctioning of privacy mixer Tornado Cash in an open letter tweeted Tuesday.

OFAC, the Treasury Department's sanctions watchdog, added Tornado Cash to its list of specially-designated nationals on allegations it helped North Korea's Lazarus hacking group launder millions of dollars' worth of crypto proceeds stolen from various crypto projects over the past two or three years. In his letter Tuesday, Emmer said these sanctions looked like a "divergence from previous OFAC precedent" as some of the addresses added were tied to smart contracts and open-source software, rather than any specific person or entity.

"OFAC's sanctions on the virtual currency anonymizing software Tornado Cash in accordance with [an Executive Order] are the first sanctions issued against something other than an individual or entity determined 'to be responsible for or complicit in' malicious cyber-enabled activities that pose a threat on United States national security, foreign policy, economic health or financial stability," he wrote in the letter.

Another Treasury unit, the Financial Crimes Enforcement Network (FinCEN), has already drawn a distinction between service providers and software providers, saying only service providers – the operators of a mixer, in this example – are subject to Bank Secrecy Act rules. Tornado Cash should be seen as an anonymizing mixer.

Read more: Issues Crypto Should Watch For in the Tornado Cash Sanctions

Emmer directed several questions at OFAC, including which entity OFAC believed should have imposed controls on Tornado Cash blockchain contracts, how U.S. users can reclaim funds currently locked in the mixer, what people who receive funds should do, whether funds locked on Tornado Cash "through some mechanism or legal fiction" belong to an entity on the SDN list or to the person who put the funds in the mixer and a handful of others.

Perhaps most pertinent to much of the crypto sector, Emmer asked how Tornado Cash addresses could appeal their designation, given they are not people or entities.

His letter echoes comments made by the broader crypto industry, which saw the sanctions as a major concern. Coin Center, a crypto think tank, has threatened to bring a legal action against the Treasury Department, saying open source software should not be sanctioned.

The Electronic Frontier Foundation has likewise taken up the cause, representing a John Hopkins Professor Matthew Green and his right to publish a fork of Tornado Cash's source code.

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