1/20 Some thoughts on the ban of #TornadoCash by OFAC:
2/20 On 8/8/22, "TORNADO CASH", tornado.cash websites + some related smart contracts were added to the list of Specially Designated Nationals + Blocked Persons (#SDN List) under the OFAC's Cyber-Related Sanctions program [CYBER2]
3/20 #CYBER2 requires US persons to block the property and interests in property of persons added to the #SDN list. CYBER2’s legal basis is Executive Order (EO) 13757 (Dec 28, 2016), which amends EO 13694 (Apr 1, 2015). home.treasury.gov/system/files/1…
4/20 The accompanying Cyber Related Sanctions Regulations are found in 31 C.F.R. part 578: ecfr.gov/current/title-…. #OFAC's #CYBER2 #FAQs here: home.treasury.gov/policy-issues/…
5/20 Under CYBER2 persons are added to the SDN list who are:“..complicit in..cyberenabled activities originating from..outside the [US] [+]..have materially contributed to..a significant threat to the..economic health..of the [US] [with] ..causing a..misappropriation of funds...
6/20 Under CYBER2 persons are added to the SDN list who are: any person…(B) to have…provided…technological support for… any activity described in [the order]…
7/20 EO 13694 defines "person” as an individual or entity and “entity” as a partnership, association, trust, joint venture, corporation, group, subgroup, or other organization.
8/20 So what is the "entity" "TORNADO CASH"? Is the #TornadoCash code the person? Are the wallet addresses identifiers of that person? Or does #OFAC equate "TORNADO CASH" with the #TORN holders who participate in Tornado governance? Unclear.
9/20 According to #OFAC FAQ 448, #CYBER2 is “directed against significant malicious cyber-enabled activities..and are not..to prevent or interfere with legitimate cyber-enabled..activities.” (home.treasury.gov/policy-issues/…)
10/20 #TornadoCash is a neutral technology. Is neutral #privacy-preserving #tech not a legitimate cyber-enabled activity? A competent #court should be asked.
11/20 Though some #US politicians have implied that "TORNADO CASH" is the #Lazarus Group, this is WRONG. #TornadoCash is a neutral #Software - i.e. #protectedspeech -, and decisions about the software are taken by a #collective of token holders, a #DAO.
12/20 By adding #TornadoCash on the SDN List, does OFAC deem #softwarecode or alternatively a #DAO to be "complicit" in cyberenabled activities, such as the #Ronin hack? What does “complicit” mean? Can software code be complicit? What are the #intent requirements?
13/20 #CYBER2 requires that “all …interests in property [of a person on the #SDN list] that are in the [#US], that hereafter come within the [#US], or that are or hereafter come within the …control of any [US] person …are [to be] blocked and may not be … dealt in”.
14/20 So #CYBER2 asks US persons to block+not deal in the banned person's property. EO13694 defines a US person as any US citizen, permanent resident alien, entity organized under US laws or any jurisdiction within the US (including foreign branches), or any person in the US.
15/20 #NonUS persons have no such obligation under #CYBER2. But many persons believe they are non-US but actually fall within the expansive defintion of US-person.
16/20 But what does blocking+not dealing here mean? Does the addition of the smart contracts mean those are property of "TORNADO CASH"? Therefore any interaction with them is banned+any “blocking” in or of those contracts possible to a US person must be executed? Likely.
17/20 Does the obligations extend to property and property interests of "TORNADO CASH" not explicitly mentioned? Likely.
18/20 31 C.F.R. part 578 suggests that the US person’s obligations begin at the date of "TORNADO CASH" appearing on the #SDN list, i.e. 8/8/22. Accordingly, from 8/8/22 onwards. No #retroactiveeffect.
19/20 The #TORN token smart contract itself was not explicitly added to the SDN list: treasury.gov/ofac/downloads…. Does this mean that US persons can continue to transact in #TORN?
20/20 #TORN owned by a user cannot at the same time be the property of "TORNADO CASH". As CYBER2 deals with the property (+interests in property) of TORNADO CASH, it appears that TORN owned by 3rd parties (not used for governance) remains unaffected. [I might be wrong though.]
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