Cryptocurrency enthusiasts seeking better privacy options had reasons to celebrate this past Thanksgiving.

Two days prior to the holiday, a unanimous panel of the Fifth Circuit ruled that the Treasury Department's Office of Foreign Assets Control (OFAC) acted outside its authority when it sanctioned Tornado Cash's open-source software rather than the individuals or entities who misuse it.

In simpler terms, Congress did not grant OFAC the authority to sanction software that is owned by no one.

Understanding Tornado Cash
As previously discussed, Tornado Cash is a crypto mixer that complicates tracing cryptocurrency transactions. While many legitimate uses exist, it has also been exploited for illegal purposes by cybercriminals.

Due to these concerns, OFAC had included multiple Tornado Cash addresses in its Specifically Designated National and Blocked Persons (SDN) list.

However, the court clarified that OFAC's powers were limited to sanctioning the property of specific individuals. The court ruled that the immutable smart contracts involved are not considered property, thus rendering OFAC's sanctions invalid.

The court, led by Judge Don Willett, emphasized the distinct nature of smart contracts, stating they do not meet the legal definition of contracts as they involve only a single party.

In addition, the court expressed that these smart contracts serve as tools rather than services themselves. The decision articulated the need to adhere to the statutory framework established by Congress.

What happens next is uncertain; the government may appeal the ruling or the Supreme Court may choose to involve itself, particularly if similar cases arise with differing conclusions. Meanwhile, the crypto community views this as a positive development, although the situation remains dynamic.