According to a recent filing, the US Treasury lacks the authority to prohibit Tornado Cash and transactions associated with it. Here are the most important things to know about this development:
1. Tornado Cash is a privacy-focused Ethereum mixer that allows users to obscure the origin of their cryptocurrency transactions. This makes it difficult for third parties to trace the flow of funds and identify the parties involved.
2. The US Treasury’s Office of Foreign Assets Control (OFAC) had previously issued guidance suggesting that using mixers like Tornado Cash could be a violation of anti-money laundering (AML) and counter-terrorism financing (CTF) regulations. However, the recent filing argues that OFAC does not have the legal authority to enforce these regulations against Tornado Cash or its users.
3. The filing was made by a group of anonymous Tornado Cash users who are seeking clarification on the legality of their activities. They argue that Tornado Cash is not a money services business (MSB) under US law, and therefore is not subject to AML/CTF regulations.
In summary, the recent filing suggests that Tornado Cash and its users may be operating within the bounds of US law, despite previous guidance from OFAC. However, it remains to be seen how regulators will respond to this challenge to their authority, and whether Tornado Cash will continue to operate without interference.