Freedom of Speech: Tornado.Cash Enigma Explained

The sanctioning of Tornado.cash, a crypto mixing service, has riled many in the crypto-world. This past week, the US Department of Treasury, Office of Foreign Assets Control (OFAC), targeted the mixer as it is said to launder the proceeds of cybercrime – not just benign uses.

In the ensuing days, services were blocked, sites were down, and authorities in the Netherlands arrested an individual that was said to be engaged with Tornado.cash.

This was the second time that a crypto mixer had been sanctioned, but the first time the US government applied an enforcement action to code- not a person or business. Tornado is, in effect, open source code. Applying sanctions to code because bad people use it is like applying sanctions to send mail transfer protocol (SMTP) because bad guys use it too.

Sether Hertlein, Global Head of Policy, took to Twitter and distilled the polemics in a very effective way.

Hertlein noted that computer code is neither a natural person nor a legal entity but “code is speech.”

“The legal doctrine of prior restraint holds that preemptive government censorship is almost always unconstitutional, and even government acts that have a substantial chilling effect on speech may be unconstitutional (Americans for Prosperity v Bonta).”

He added that:

“Sanctions law is a strict liability regime, meaning that if an American transacts with a sanctioned person, without intent or even the knowledge of having done so, they can be sentenced to 30 years in federal prison. This is a quintessential prior restraint & chilling effect. Beyond the likely 1st Amendment violation, this action also raises significant due process concerns in that the code was not afforded adequate notice or opportunity to appeal and individuals may be implicated without means to comply.”

Whether or not Treasury’s move to sanction code is legal, litigating this can take a long time so in the near term the feds accomplish their objectives.

“We enjoy the benefits of public goods and infrastructure every day: the internet, our wireless networks, our money, the banking system, our roads and highways, transportation infrastructure. Guess what? Criminals use these everyday, too. Of course, we should pursue criminal (persons) who misuse public goods, but we don’t sanction SMTP because hackers send phishing emails or I-95 because drug dealers drive on it or cell towers that route terrorists’ calls. These are not persons – neither is Tornado Cash. Like email and highways, Tornado Cash has been misused by criminals for criminal ends. However, Tornado Cash is also a tool that enables law abiding citizens to maintain their privacy on the blockchain for a host of legal purposes, including political speech.”

So Hertlein posits that if Treasury can sanction Tornado.cash it can sanction any code. A terrifying thought. The current administration is already being criticized for taking authoritarian actions so add this one to the list.

“Ultimately, there is no freedom without privacy and there can be no democracy without free speech. Privacy and free speech are the bedrock of free and open societies. Make no mistake – THIS is what Treasury sanctioned this week.”

 



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