Defending Privacy in Crypto

Tl;dr: Coinbase is funding a lawsuit introduced by six individuals difficult the U.S. Treasury Department’s sanctions of the Tornado Cash sensible contracts and asking the Court to take away them from the U.S. sanctions checklist. The sanctions exceed Treasury’s authority, hurt harmless individuals, take away privateness and safety choices for crypto customers, and stifle innovation.

By Brian Armstrong, CEO and Cofounder

Today we’re saying that Coinbase is funding a lawsuit introduced by six individuals difficult the United States Treasury Department’s sanctions of the Tornado Cash sensible contracts and asking the Court to take away them from the U.S. sanctions checklist.

Tornado Cash is an open supply piece of software program operating on the Ethereum blockchain that preserves privateness by permitting customers to deposit property from one crypto handle and withdraw them utilizing a distinct crypto handle.

Last month, Treasury sanctioned the Tornado Cash software program as a result of it was being utilized by criminals — together with North Korean hackers. We haven’t any difficulty with the Treasury sanctioning unhealthy actors and we take a tough stance towards illegal conduct. But on this case, Treasury went a lot additional and took the unprecedented step of sanctioning a complete know-how as a substitute of particular people. The downside right here is twofold: (1) there are reputable purposes for this sort of know-how and on account of these sanctions, many harmless customers now have their funds trapped and have misplaced entry to a essential privateness software, and (2) we consider the Treasury exceeded its authority, given by Congress, by sanctioning a know-how.

At Coinbase, we’ve been preventing illicit exercise because the very starting, and whereas we share Treasury’s dedication to preventing crime, we consider this motion harms harmless individuals and threatens the way forward for decentralized finance (DeFi) and web3 particularly.

Treasury used a hammer as a substitute of a scalpel

The nature of the blockchain — the place each transaction is public — makes crypto safer. But it may well additionally create privateness issues. If you obtain your wage in crypto, for instance, you won’t need the world to understand how a lot cash you make, or the way you select to spend it.

That’s why the people we’re supporting on this case used Tornado Cash within the first place:

  • One particular person used Tornado Cash to anonymously donate cash to Ukraine. Afterwards, his pockets acquired probably malicious air drops. But as a result of he anonymized his crypto earlier than donating, he prevented assaults towards his private accounts. He has funds trapped in Tornado Cash.
  • Another particular person is an early crypto adopter with a big on-line presence and a public ENS identify linked to his Twitter profile. He used Tornado Cash to guard his private safety whereas transacting. Now he additionally has funds trapped in Tornado Cash.
  • A 3rd particular person operates an Etherum staking enterprise. At one level, a stranger working close to the place he engages in staking requested how a lot cash he was incomes. He began utilizing Tornado Cash to guard his property and his private security.

Sanctioning open supply software program is like completely shutting down a freeway as a result of robbers used it to flee a criminal offense scene. It’s not the easiest way to resolve an issue. It finally ends up punishing individuals who did nothing flawed and leads to individuals having much less privateness and safety.

We consider legislation abiding residents have a proper to privateness, particularly with a few of their most delicate information: their funds.

Treasury acted exterior its authority

The second downside is that, whereas Treasury is allowed to sanction individuals (together with their property), Congress by no means gave it the facility to sanction open supply software program. That’s why these plaintiffs are going to courtroom to ask that this software program be faraway from the U.S. sanctions checklist. You can learn extra about our authorized argument here.

This will stifle innovation

Finally, sanctioning open-source code has a chilling impact on innovation.

Right now, builders are frightened that they may very well be held liable for one thing they’d nothing to do with, and no skill to manage. At a time after we ought to be encouraging innovation, this type of concern and uncertainty will do the other — making builders marvel if, by pushing the trade ahead, they may very well be placing themselves at threat.

As one of many largest corporations in crypto, we’ve got a accountability to defend the crypto trade towards actions that go too far, and deal with crypto on an uneven taking part in area. It’s not sufficient to simply say we disagree and sit on the sidelines. That’s why we’re funding and supporting this lawsuit.

We will totally adjust to the legislation whereas we await the courtroom’s determination. But we’re hopeful that these sanctions will likely be reversed, permitting harmless crypto customers to regain entry to their funds and making it attainable for anybody to make use of privateness instruments to guard themselves.


Defending Privacy in Crypto was initially revealed in The Coinbase Blog on Medium, the place persons are persevering with the dialog by highlighting and responding to this story.

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