One of the biggest stories this week so far is the continuing clampdown on crypto by various corners of the U.S. government. Agencies and policymakers are resuming their interest in the space, particularly as it comes to light how damaging crypto scams are to investors and how the funds are being used. Recently, Tornado Cash found itself stuck in the middle of this fray. But as the government lays down sanctions on the project, a debate is sparking around free speech and crypto coding.
The tides certainly seem to be turning when it comes to crypto. Of course, Congress is starting to work on infrastructure to bring order to the “wild west” market; President Joe Biden’s executive order is getting the ball rolling and several lawmakers have introduced crypto bills. However, agencies outside of the legislative and executive branches are also starting to take notice.
For one, the U.S. Department of Justice (DOJ) is starting to involve itself in crypto crime solving now more than ever. The department has already made several blockbuster arrests. In March, the DOJ arrested two people involved in a non-fungible token (NFT) rug-pull scheme. In June, it also arrested six people in connection with a crypto fraud project. Finally, the DOJ made its first-ever arrests for crypto insider trading in July.
Even more recently, though, the U.S. Treasury is entrenching itself in this space. Most notably, the Office of Foreign Assets Control (OFAC) recently levied sanctions against crypto mixing project Tornado Cash. Now, U.S. investors are barred from accessing the project as well as a number of associated crypto wallet addresses.
Tornado Cash Sanctions: A Violation of Free Speech?
The Tornado Cash sanctions make for some of the earliest sanctions by the U.S. government against a crypto project. Now, the effects are already showing; GitHub recently pulled Tornado Cash’s source code from its website. But is sanctioning code a violation of fundamental American rights? That’s what many investors are arguing in the wake of the sanctions.
The Treasury was motivated toward sanctions based on evidence that Tornado Cash is a tool of choice for crypto criminals laundering stolen funds. The project has users like the Lazarus Group, a hacking group sponsored by the North Korean government. But despite Tornado Cash attracting some unsavory users, investors argue that the government can’t punish its developers.
This news is sparking a debate over free speech and programming, with many saying Tornado Cash is protected by the First Amendment. Tornado Cash cofounder Roman Semenov first questioned GitHub’s decision to pull the code from its site, sparking this discussion. The Blockchain Association’s Head of Policy, Jake Chervinsky, also says the Treasury went too far; Chervinsky believes the Treasury should be going after the “bad actors” themselves, not developers.
Legal precedent does exist around code protections; a set of court cases from the mid-90s, Bernstein v. U.S., rules that the First Amendment protects code in the same way as speech. This precedent has many users jumping to the defense of Tornado Cash, regardless of its use in illicit activity.
On the date of publication, Brenden Rearick did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.