Kraken CEO Doubts Decision to Ban Tornado Cash Will Survive in Court: Report 

The shutdown of Tornado Cash by the US Treasury Department on August 8 has made Kraken CEO Josse Powell question the constitutionality of the decision.

In an interview with Bloomberg TV on Tuesday, Powell doubted if the Treasury’s move will withstand judicial scrutiny.

Tornado Cash allows users to conceal sources and destinations of funds by mixing several users’ coins before sending them to their destination addresses.

Powell argued that banning Tornado Cash because it is being used by criminals is similar to banning email services because some criminals may be employing them.

Kraken, USDC Block Tornado Addresses

Meanwhile, Kraken has blocked accounts linked to Tornado Cash following the United States Treasury Department’s sanctions against the crypto mixer platform. Earlier, USDC stablecoin, run by a consortium of Circle and Coinbase, had similarly blocked addresses linked to the mixer.

Circle CEO Jeremy Allaire said Circle and Coinbase must follow the Treasury’s sanctions against Tornado Cash in line with Bank Secrecy Act.

However, Allaire, too, questioned the ban. “It raises extraordinary questions about privacy and security on the internet, and the future of public internet digital currency,” he said.

Powell referred to Circle’s decision to block Tornado Cash addresses because of the US Treasury’s crackdown on the crypto mixing platform as a move to control decentralized networks.

“Having a digital currency that’s so controlled and able to be controlled by maybe unconstitutional government action is a little bit scary, too,” Powell said.

Right to Financial Privacy

The Kraken CEO argued that among the Tornado users, there are also privacy-seeking and law-abiding consumers whose interests should not have been jeopardized.

“People have a right to financial privacy…,The code repositories were taken down, a step I think was not necessary … This is mostly a knee jerk, recently to what happened to UST and Luna,” the Kraken CEO added.

In defense of the privacy protection features of Tornado Cash, Ethereum co-founder Vitalik Buterin recently came out in the open to say that he did use the mixer platform to send his donation to Ukraine, not to protect his identity but that of the recipient.

Coin Center to Challenge the Ban

Non-profit crypto policy think tank Coin Centre on August 15, released a legal analysis of the OFAC’s shutdown order, arguing that banning the entire platform is not justified.

“We are also now exploring bringing a challenge to this action in court,” it said in its statement, adding that OFAC may have exceeded its statutory authority.

Banning of Tornado Cash

Tornado Cash has been on the radar of the US Treasury since the Ronin Bridge hack in March, in which the attackers stole over $625 million.

“Tornado Cash has laundered crypto worth over $7 billion since 2019, which includes more than $455 million stolen by the notorious North Korean hacker Lazarus Group,” CryptoPotato reported citing the US Treasury’s PR.

There were several other big-ticket hacks and heists in the crypto space since the beginning of 2022, amounting to $1.4 billion. In many instances, the attackers diverted the funds through Tornado Cash and managed to remain traceless. Some of the victims are US citizens, the US Treasury argued.