Last week Coinbase announced that it was funding a lawsuit brought by six people that challenges the recent action by the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) sanctioning the Tornado Cash smart contracts. The lawsuit asks the court to remove the Tornado Cash smart contract addresses from OFAC's Specially Designated Nationals (SDN) List. The plaintiffs argue that OFAC exceeded its authority from Congress and the president in sanctioning open-source technology rather than sanctioning bad actors who used it and those actors' property. They also allege that OFAC's actions infringe on their constitutional rights "and threaten[] the ability of law-abiding Americans to engage freely and privately in financial transactions."

Crypto investment firm Paradigm also responded to OFAC's actions by publishing a detailed position paper, co-authored by the Crypto Council for Innovation, that addresses what monitoring and censoring obligations OFAC's actions place on participants in crypto's base layer. The paper goes on to criticize OFAC's sanctioning of Tornado Cash and asserts that onerous regulation and targeted actions against players in the crypto space will eventually push blockchain innovators out of the United States, and make it more difficult – not less – to track crypto transactions that threaten national security.

For more information, please refer to the following links:

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.