Coinbase's Legal Chief Criticizes Treasury's Tornado Cash Delisting Process

Coinbase's Chief Legal Officer, Paul Grewal, has publicly criticized the US Treasury for its handling of the delisting procedure for the crypto mixer Tornado Cash from the Specially Designated Nationals and Blocked Persons (SDN) list. Grewal's criticism centers on the Treasury's attempt to waive the need for a final judgment in the case, a move he argues is contrary to established legal processes.

In a post on X, Grewal highlighted that the Treasury's filing seeks to moot the need for a final judgment, arguing that the issue is no longer significant or actionable following Tornado Cash's removal from the SDN list. However, Grewal contends that such a filing is only appropriate if the defendant can demonstrate that the practice cannot reasonably be expected to recur. He cited several legal precedents where law enforcement agencies removed sanctions but did not move to close the case, allowing for the possibility of re-imposing sanctions in the future.

Grewal's criticism comes amidst a protracted legal battle involving Tornado Cash users who challenged the Treasury's decision to place the mixer on the SDN list. The users argued that the smart contract did not form property under the International Emergency Economic Powers Act (IEEPA) as it is non-erasable. The court ruled in favor of the users, clarifying the status of Tornado Cash's smart contract. Despite this ruling, Grewal criticized the Treasury for failing to comply fully with the court's decision.

Tornado Cash has received support from various entities, including Coinbase and the Ethereum Foundation, which has backed the legal defense of lead developer Alexey Pertsev. The legal battle has been contentious, with users and supporters arguing that the Treasury's actions were disproportionate and lacked a clear legal basis. The lifting of sanctions against Tornado Cash marks a significant development in the ongoing debate over the regulation of crypto mixers and the legal framework governing their use.