'Last Monday, the Treasury Department’s Office of Foreign Assets Control (OFAC) made a designation adding Tornado Cash to the Specially Designated Nationals And Blocked Persons (SDN) List that it administers. Hours after the designation, we posted our preliminary analysis of the action and said we believed it might be statutorily and constitutionally deficient. Over the last week we have had the time to conduct a fuller legal analysis, which we now present here.
As we suspected, we believe that OFAC has overstepped its legal authority by adding certain Tornado Cash smart contract addresses to the SDN List, that this action potentially violates constitutional rights to due process and free speech, and that OFAC has not adequately acted to mitigate the foreseeable impact its action would have on innocent Americans. We intend to work with other digital rights advocates to pursue administrative relief. We are also now exploring bringing a challenge to this action in court.
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What Comes Next
Given all this, what are our next steps?
First, we will seek to engage OFAC, share our views, and hopefully hear theirs. We have also had inquiries from members of Congress about the situation and we will continue to brief interested parties there.
Second, there are innocent Americans who have funds trapped at listed Tornado Cash addresses. We will do our best to help them apply for a license to withdraw those funds. In addition, the DeFi Education Fund has announced that it will be petitioning OFAC to issue a “general license” that would cover all affected persons without each having to file individually and we will support that effort.
Finally, we will begin exploring with counsel a court challenge to this action. Stay tuned.
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