Introduction: A Controversial Decision
Paul Grewal, the Chief Legal Officer at Coinbase, has voiced strong criticism against the U.S. Treasury’s recent move to declare a court ruling on Tornado Cash as moot. This comes in the wake of the Treasury’s decision to remove the crypto mixing service from its sanctions list, a move that has sparked considerable debate within the crypto community.
The Background of Tornado Cash
On Friday, the Treasury Department lifted the sanctions on Tornado Cash, a platform that had previously been blacklisted in 2022 for allegedly facilitating the laundering of $445 million linked to the North Korean hacker group Lazarus. Alongside the delisting, the Treasury also removed over 100 Ethereum (ETH) addresses from the Specially Designated Nationals (SDN) list, signaling a significant shift in its stance toward the crypto mixer.
Treasury’s Argument: A Moot Issue?
In a court filing dated March 21, the Treasury argued that its decision to delist Tornado Cash effectively resolved the legal dispute, making a final court judgment unnecessary. However, this assertion has been met with skepticism from Grewal and others who are concerned about the implications of such a move.
Grewal’s Counterarguments
Grewal contends that the Treasury’s attempts to dismiss the case as moot are an evasion of a definitive ruling from the Fifth Circuit Court of Appeals. He emphasized that their argument overlooks the legal principle that a defendant’s voluntary cessation of a challenged practice only renders a case moot if it can demonstrate that the practice will not “reasonably be expected to recur.”
A Legal Precedent
To illustrate his point, Grewal referenced the FBI v. Fikre case, where the government removed Yonas Fikre from the No Fly List. The government argued that this action made Fikre’s lawsuit moot. However, the Ninth Circuit reversed this decision, maintaining that the burden of proof lies with the government to show that the conduct in question would not happen again.
The Uncertainty Surrounding Tornado Cash
In the case of Tornado Cash, Grewal argues that the Treasury has failed to provide any assurance that it will not re-impose sanctions. He stated, “While the Treasury has removed the Tornado Cash entities from the SDN list, it has offered no guarantees that they won’t relist Tornado Cash in the future. This lack of assurance is insufficient and will be made clear to the district court.”
Conclusion: A Call for Clarity
As the debate continues, Coinbase remains actively engaged in the legal fight regarding Tornado Cash. Grewal’s criticisms highlight the broader implications of the Treasury’s actions and the importance of establishing a clear legal framework for the future of cryptocurrency regulation in the United States. The outcome of this case could have lasting effects on the crypto industry and its interaction with regulatory bodies.
