Seth Hertlein Profile picture
Aug 10 20 tweets 8 min read
1/ This week, the US Treasury Dept did something it’s never done before: it sanctioned a piece of code. Weird, right? Actually, it makes perfect sense. Let’s peel that onion!🧅🧵👇
2/ Specifically, Treasury added the 🌪️Tornado Cash URL and smart contract addresses to the Specially Designated Nationals And Blocked Persons List (SDN). TC is a crypto mixer that allows people to maintain their privacy online.
3/ Prior to Tornado Cash, sanctions have only been levied against persons. It is illegal for Americans to transact with any person on the SDN list. Due to the legal doctrine of corporate personhood, formal business entities can also be put on the naughty list.
4/ However, computer code is neither a natural person nor a legal entity. Code is speech (Bernstein v DOJ). Similarly, money is speech or, more precisely, what you do with your money is speech (Buckley v Valeo; Citizens United v FEC).
5/ The legal doctrine of prior restraint holds that preemptive government censorship is almost always unconstitutional, and even government acts that have a substantial chilling effect on speech may be unconstitutional (Americans for Prosperity v Bonta).
6/ Sanctions law is a strict liability regime, meaning that if an American transacts with a sanctioned person, without intent or even the knowledge of having done so, they can be sentenced to 30 years in federal prison. This is a quintessential prior restraint & chilling effect.
7/ Beyond the likely 1st Amendment violation, this action also raises significant due process concerns in that the code was not afforded adequate notice or opportunity to appeal and individuals may be implicated without means to comply.
8/ While the law does not seem to be in Treasury’s favor, litigation will take years to play out. Treasury knows this.
9/ Now, I’ve seen a lot of discussion essentially saying, “Tornado Cash was used by criminals and 🇰🇵 hackers, so it deserves to be shut down.” While I don’t support either, let me explain why this reaction misses the point.
10/ If Treasury had sanctioned the criminals and hackers that used Tornado Cash, no problem. But, Tornado Cash is open-source code, meaning it’s not owned by anyone and is freely available to everyone. It is, thus, a public good.
11/ We enjoy the benefits of public goods and infrastructure every day: the internet, our wireless networks📶, our money💵, the banking system🏦, our roads and highways🛣️, transportation infrastructure✈️. Guess what? Criminals use these everyday, too.
12/ Of course, we should pursue criminal (persons) who misuse public goods, but we don’t sanction SMTP because hackers send phishing emails or I-95 because drug dealers drive on it or cell towers that route terrorists' calls. These are not persons - neither is Tornado Cash.
13/ Like email and highways, Tornado Cash has been misused by criminals for criminal ends. However, Tornado Cash is also a tool that enables law abiding citizens to maintain their privacy on the blockchain for a host of legal purposes, including political speech.
14/ Taking this to its logical conclusion: If Treasury can sanction Tornado Cash, it can sanction any code. No software is safe. If sanctions are no longer limited to persons, what other objects or information can the govt summarily jail you for 30 years for interacting with?
15/ Ultimately, there is no freedom without privacy and there can be no democracy without free speech. Privacy and free speech are the bedrock of free and open societies. Make no mistake - THIS is what Treasury sanctioned this week.
16/ @Ledger stands for freedom. @_pgauthier @P3b7_
18/ And, see @valkenburgh's dialed-in remarks at @ZcashFoundation's #ZCon3 here: @ElectricCoinCo, @zooko, @jswihart
19/ Finally, there are other defenders of freedom and privacy who I’m sure will take up this cause. Many are already working. Thank you @BlockchainAssn, @jchervinsky, @fund_defi, @millercwl, @EFF, @fightfortheftr, @HRF, @gladstein, @privacyforum, @PamDixon_

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More from @SethHertlein

Jul 1
1/ Today, the EU finalized #MiCA, a sweeping #crypto regulation that will profoundly impact Europe’s future competitiveness and the viability of its #Web3 industry. This was Europe’s chance to regain market share lost in Web2, but did the EU seize the opportunity?

🧵A thread…
2/ TLDR, no. MiCA doubles down on the failed notion of “leading in regulation” rather than prioritizing innovation. But, it could have been worse.
3/ In recent months, we at @Ledger spoke out about these proposals, even calling on you to get engaged against the worst ideas. We opposed the #Bitcoin ban that came just 4 votes from passing the EU Parliament.…
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