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US lawmaker asks Treasury about tornado cash penalties

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US lawmaker asks Treasury about tornado cash penalties

Key points to remember

  • Rep. Tom Emmer (R-MN) raised questions about the decision to sanction Tornado Cash in a letter sent to the Treasury Department today.
  • Emmer called the ban on “neutral, open source and decentralized technology” a “divergence” from historical precedent.
  • Among other things, Emmer asked what recourse law-abiding users of Tornado Cash might have to reclaim funds trapped in the protocol.

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The US Treasury’s decision to sanction software presents a “divergence from OFAC precedent,” says Rep. Tom Emmer (R-MN).

Penalties questioned

A US lawmaker is questioning the US Treasury’s decision to sanction Tornado Cash.

Congressman Tom Emmer (R-MN) published A letter today to Treasury Secretary Janet Yellen outlining the sanctions against Tornado Cash, a “neutral, open-source, decentralized technology,” raised new questions about US national security as well as individuals’ right to private life.

On August 8, the Treasury’s Office of Foreign Assets Control (OFAC) took the unusual step of pronounce sanctions against the Ethereum Tornado Cash mixing protocol, as well as several Ethereum addresses associated with it, making the use of the protocol effectively illegal under US law. The move was met with fear and criticism, with many in the crypto community worrying about the government’s ability to outright ban open source software, as opposed to a person or entity, as is traditionally the case.

Emmer called the addition of Tornado Cash to the sanctions list “a departure from OFAC’s previous precedent” since several of the banned addresses do not belong to individuals, entities or properties but are “tools widely distributed technologies” that are not under the control of any centralized party.

The congressman asked for clarification on several points, including whether Treasury believes some of the sanctioned addresses belong to people controlling Tornado Cash, factors that led Treasury to add technology to a sanctions list, whether U.S. users innocents of Tornado Cash resort to unlocking their funds, or if the people who receive unsolicited funds from authorized addresses should be considered a violation of the law.

Emmer is considered a friend of the crypto industry on the Hill and has been a particularly vocal critic of government efforts to regulate the industry, which he often calls overkill. In July he critical the Securities and Exchange Commission under the chairmanship of Gary Gensler as a “power-hungry regulator” who tried to “Jam [crypto companies] in infraction. He also opposes a central bank digital currency (CBDC) being issued directly to consumers, citing privacy concerns and arguing that large-scale CBDCs, like the Chinese digital yuan, “fundamentally omit the benefits and protections of cash”. Today’s letter to the Treasury will likely bolster its reputation as a crypto ally in Washington.

Disclosure: At the time of writing this article, the author of this article owned ETH and several other cryptocurrencies.

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