Coinbase CLO Blasts U.S. Treasury for Defying Court Ruling on Tornado Cash

Paul Grewal, Chief Legal Officer of Coinbase, has criticized the U.S. Treasury Department for allegedly disregarding a court ruling related to the delisting of Tornado Cash. The controversy centers around the Treasury’s continued enforcement actions against the crypto mixing service despite a legal challenge questioning the legitimacy of its sanctions.

The Legal Battle Over Tornado Cash

Tornado Cash, a decentralized cryptocurrency mixer, was sanctioned by the U.S. Treasury’s Office of Foreign Assets Control (OFAC) in August 2022, citing concerns over its use in money laundering activities. The decision led to restrictions on U.S. users interacting with the service and resulted in major platforms, including Coinbase, opposing the ban on legal grounds.

A recent court ruling challenged the Treasury’s actions, arguing that banning open-source software without clear legal justification could set a dangerous precedent. However, Coinbase’s legal team now claims that the Treasury has failed to acknowledge or act in accordance with the court’s findings.

Coinbase’s Stance Against the Treasury

Paul Grewal has been vocal about Coinbase’s opposition to the Tornado Cash sanctions, arguing that the Treasury’s approach undermines financial privacy and violates legal norms. In a statement, he accused the agency of ignoring due process and acting beyond its regulatory authority.

“Government agencies must follow the law just like everyone else,” Grewal stated. “Disregarding a court ruling sets a troubling precedent for both the crypto industry and fundamental legal principles.”

Implications for the Crypto Industry

The dispute between Coinbase and the Treasury highlights the ongoing regulatory uncertainty surrounding digital assets in the U.S. Key concerns include:

• Regulatory Overreach – Coinbase argues that sanctioning open-source software without targeting specific bad actors could stifle innovation and limit lawful uses of privacy-enhancing tools.
• Impact on Crypto Privacy – The case raises questions about the government’s ability to regulate decentralized technologies and the broader implications for financial privacy.
• Precedent for Future Crypto Regulations – The outcome of this dispute could influence how regulators approach other blockchain-based applications and decentralized finance (DeFi) projects.

Coinbase has signaled its commitment to challenging the Treasury’s actions, possibly escalating the case to higher courts. Meanwhile, industry leaders and legal experts are closely watching how the U.S. government handles the situation, as it could shape future regulations for crypto privacy tools.

As the legal battle unfolds, the crypto industry awaits further clarity on how privacy-focused blockchain applications will be treated under U.S. law. The outcome could determine whether Tornado Cash remains a banned service or if regulatory frameworks will evolve to accommodate financial privacy in the digital age.