The Stanford Blockchain Club has issued a scathing criticism of the US Department of Justice (DOJ). Prosecution from Cash Tornado Developers Roman Storm and Roman Semenov call it a violation of outdated federal money transfer laws.
In its report, Tornado Cash and the Borders of Money Transfers, the club challenged the Justice Department's use of 18 USC § 1960, a statute aimed at unauthorized money transfer businesses, to charge the developers of Tornado Cash, a decentralized organization. Ethereumbased protocol
A 2023 Justice Department indictment called Tornado Cash an “unlicensed money transmission business” for enabling users to make crypto transactions anonymously.
The Stanford Blockchain Club argued that the statute, which was written before the advent of blockchain technology, did not address the nuances of decentralized protocols like Tornado Cash, which operate through immutable smart contracts without intermediaries or custodians.
According to this report:
“The DOJ's aggressive use of 18 USC § 1960 raises broader questions about the dangers of expanding statutory language to cover new technologies. This approach invites unelected officials and the judiciary to overstep their constitutional limits and circumvent Congress' powers to legislate.”
The report emphasized the constitutional implications of using executive enforcement to regulate emerging technologies. warned that such actions Bypassing the democratic process and the risk of stifling innovation by conflating legitimate uses of privacy tools with illegal activity.
Stanford University, known for its leadership in legal and technological innovation, has a history of engaging with complex regulatory challenges. The Blockchain Club report continues this tradition by examining the tension between privacy rights and regulatory oversight in the digital financial space.
The Tornado Cash case highlights the growing debate over financial privacy and the risk of these new technologies being misused by bad actors.
Advocates, including the Stanford Blockchain Club, argue that protocols like Tornado Cash meet legal privacy requirements by allowing people to protect their identities in transactions. Meanwhile, critics argue that such tools facilitate money laundering and other illegal activities.
The publication of this report makes a significant contribution to the ongoing debate about how the US legal system can adapt to DeFi technologies. It remains to be seen whether the judiciary will take such criticism into account as it continues to grapple with the complexities of blockchain regulation.
