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Coinbase CLO Slams US Treasury for Defying Court Ruling In Tornado Cash Case

Coinbase's Paul Grewal criticizes U.S. Treasury for defying court ruling on Tornado Cash sanctions, raising concerns over continued actions.
Coinbase CLO Slams US Treasury for Defying Court Ruling In Tornado Cash Case

Highlights

  • Coinbase's Paul Grewal slams U.S. Treasury for not fully complying with a court ruling on Tornado Cash sanctions.
  • Fifth Circuit Court ruled Tornado Cash's immutable smart contracts aren’t "property" under IEEPA, invalidating sanctions.
  • Despite court decision, U.S. Treasury seeks partial delisting of Tornado Cash, ignoring the full ruling on smart contract sanctions.

Coinbase Chief Legal Officer Paul Grewal has criticized the U.S. Department of Treasury for failing to comply with a court ruling related to the sanctions placed on Tornado Cash. His statements come after the Treasury indicated its intention to defy parts of a Fifth Circuit Court decision that challenged the legality of the sanctions.

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US Treasury’s Response to the Court Ruling

The Fifth Circuit Court of Appeals recently ruled that the action by the U.S. Treasury Department was unlawful as it put Tornado Cash on the Specially Designated Nationals (SDN) list. The court noted that Tornado Cash’s smart contract was non-erasable, so it did not constitute “property” under the International Emergency Economic Powers Act (IEEPA).

However, the Treasury has expressed willingness not to abide to the order of the court fully, but rather wants to suggest for remand for the proceedings.

In a sequence of tweets, Paul Grewal criticized the Treasury by stating that he was disappointed by its decision. He stated that though the court has dismissed the arrangement through which the Treasury listed Tornado Cash, that the Treasury is still looking to partially delist the entity.

“They say trust us,” Grewal said, referring to the Treasury’s assurance that it will abide by the ruling on the grounds that doing so may compromise national security. Grewal stated that the Treasury exceeds its authority erasing the Congress direction thus reviving the problems that led to a court case in the first place.

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Court Decision on Tornado Cash

The Fifth Circuit came to the decision in December 2024 to resolve whether Tornado Cash’s smart contracts are properties that are prohibited from U.S. sanctions. The court further held that immutable smart contracts could not be considered as property under IEEPA.

It separated them from changeable smart contracts which could be managed and employed for unlawful purposes. Thus, the court did not question the Treasury’s ability to sanction Tornado Cash as an entity but addressed its treatment of the smart contracts only.

The ruling was seen as a significant blow to the Treasury’s case. However, the court did not provide a broad ruling on the legality of the Treasury’s decision to sanction Tornado Cash as a whole. Instead, it stated that these immutable contracts did not meet the definition of property under IEEPA and could not be blocked as part of the sanctions process.

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Treasury’s Proposed Action Moving Forward

Despite the court ruling, the U.S. Treasury is proceeding cautiously. The agency has stated that it plans to remand the issue to the Department of the Treasury and the Office of Foreign Assets Control (OFAC) for further review. The Treasury has also indicated that it will begin the process of removing Tornado Cash from the SDN list, although no specific timeline has been provided.

Grewal has voiced concerns about the Treasury’s proposed approach. He noted that rather than fully comply with the court’s decision, the Treasury appeared to be looking for ways to maintain sanctions on Tornado Cash. This, according to Grewal, is a continuation of the same actions that led to the legal challenge in the first place.

However, the plaintiffs in the case, including Coinbase, plan to file a reply to clarify their position and ensure the Treasury complies with the court’s decision.

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Kelvin Munene Murithi

Kelvin Munene is a crypto and finance journalist with over 5 years of experience, offering in-depth market analysis and expert commentary . With a Bachelor's degree in Journalism and Actuarial Science from Mount Kenya University, Kelvin is known for his meticulous research and strong writing skills, particularly in cryptocurrency, blockchain, and financial markets. His work has been featured across top industry publications such as Coingape, Cryptobasic, MetaNews, Cryptotimes, Coinedition, TheCoinrepublic, Cryptotale, and Analytics Insight among others, where he consistently provides timely updates and insightful content. Kelvin’s focus lies in uncovering emerging trends in the crypto space, delivering factual and data-driven analyses that help readers make informed decisions. His expertise extends across market cycles, technological innovations, and regulatory shifts that shape the crypto landscape. Beyond his professional achievements, Kelvin has a passion for chess, traveling, and exploring new adventures.

Why trust CoinGape: CoinGape has covered the cryptocurrency industry since 2017, aiming to provide informative insights to our readers. Our journalists and analysts bring years of experience in market analysis and blockchain technology to ensure factual accuracy and balanced reporting. By following our Editorial Policy, our writers verify every source, fact-check each story, rely on reputable sources, and attribute quotes and media correctly. We also follow a rigorous Review Methodology when evaluating exchanges and tools. From emerging blockchain projects and coin launches to industry events and technical developments, we cover all facets of the digital asset space with unwavering commitment to timely, relevant information.
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