Last week, the crypto world celebrated a major legal victory when a federal appeals court struck down OFAC’s sanctions on Tornado Cash’s immutable smart contracts in a Coinbase-funded lawsuit. While this decision is a significant win for crypto, its implications go far beyond the industry—it challenges the very limits of U.S. sanctions authority on open-source code.

In this episode, Coinbase’s Chief Legal Officer Paul Grewal and VP of Legal Leah Bressack discuss the case, the reasoning behind the court’s decision, and its broader implications, especially given that other cases are still in court. They address whether they think the government will appeal, how this ruling impacts other privacy tools and the other lawsuits, and why the case is a critical precedent for the intersection of code, law, and innovation.

Plus, what does this mean for Tornado Cash developer Roman Storm?

Show highlights:

Why the decision was so significant, according to Paul
What reasons the judge used in the ruling
The basics of Tornado Cash and why OFAC sanctioned it in 2022
Why Coinbase decided to get involved in the case
Why a District Court had previously agreed with OFAC
Whether the government will appeal and what the implications of the case are outside of crypto
When users could start using the protocol
Whether users will be safe to use relayers, which add privacy
Why Paul believes that the 11th Circuit, where the Coin Center Tornado Cash lawsuit was filed, will not ignore this ruling from the 5th Circuit
Whether the judges were encouraging Congress to update IEEPA to make it possible for OFAC to sanction smart contracts
Whether there’s a risk that under new legislation OFAC could sanction smart contracts
How the case of Tornado Cash developer Roman Storm could be impacted by this decision
Paul’s and Leah’s take on Balaji’s proposal to build privacy-preserving zero knowledge smart contracts on ZEthereum
Whether the judges’ opinion will have an impact on existing privacy projects
What types of sanctions and regulations the government can impose to prevent money laundering

Visit our website for breaking news, analysis, op-eds, articles to learn about crypto, and much more: unchainedcrypto.com

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Guests:

Paul Grewal, Coinbase’s chief legal officer
Previous appearances on Unchained:
Coinbase’s Top Lawyer Calls SEC Wells Notice a ‘Massive Overreach’ - Unchained
Just a Coincidence? Coinbase and Polygon Lawyers See Bad Omens in SEC Crackdown
Leah Bressack, VP of legal at Coinbase

Links

Previous coverage of Unchained on Tornado Cash:
Did OFAC Overstep by Sanctioning Tornado Cash?
Tornado Cash Sanctioned. Did the Government Overstep Its Bounds?
Unchained: Treasury Overstepped With Tornado Cash Sanctions, Rules U.S. Appeals Court
Balaji’s tweet on Zatoshi and Zethereum
Bankless: Roman Storm Speaks - Tornado Cash Developer on What’s at Stake

Timestamps:

00:00 Intro
01:39 Why this ruling is a major milestone for crypto
02:50 The judge’s key reasoning in striking down the sanctions
04:00 Why Tornado Cash was sanctioned in 2022
06:43 How Coinbase became involved in this landmark case
13:05 Why the District Court initially sided with OFAC
15:55 Whether the government will appeal, and what’s at stake beyond crypto
21:22 When Tornado Cash could be used again
25:07 Are users safe to use relayers for added privacy?
33:53 Why the 11th Circuit might uphold this ruling
38:28 Whether Congress is being nudged to rewrite sanctions laws
40:52 Could new legislation let OFAC target smart contracts again?
44:46 What this means for Tornado Cash developer Roman Storm
48:34 Thoughts on Balaji’s idea for ZEthereum
50:53 How the ruling could influence other privacy projects
54:08 What sanctions might look like in the fight against money laundering

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