Coinbase Backs Lawsuit Against US Treasury

Sanctions on open source technology may have “a chilling effect on innovation,” Coinbase CEO Brian Armstrong said

article-image

Coinbase CEO Brian Armstrong | blockworks exclusive art by axel rangel

share
  • The Treasury sanctioned cryptocurrency mixer Tornado Cash for facilitating money laundering of more than $7 billion worth of digital currencies
  • Six plaintiffs have filed a lawsuit against the Treasury’s Office of Foreign Assets Control

Centralized cryptocurrency exchange Coinbase is funding a lawsuit filed against the US Treasury Department’s Office of Foreign Assets Control (OFAC) by six people affected by the Tornado Cash sanctions.

The lawsuit asks the court to remove Tornado Cash from the US sanctions list — currently, it is illegal for any US person to interact with the app.

Calling the move “unprecedented, overboard action” that oversteps the government’s authority, the suit argues the Treasury’s stance “infringes on Plaintiffs’ constitutional rights [and] threatens the ability of law-abiding Americans to engage freely and privately in financial transactions.”

Cryptocurrency mixers such as Tornado Cash allows users to privately deposit assets from a crypto address and withdraw them using a different address. The Treasury says that a DPRK state-sponsored cyber-hacking group has used Tornado Cash to launder more than $7 billion worth of digital currencies. 

These sanctions “represent a significant unauthorized expansion of OFAC’s authority,” which have directly “harmed innocent people seeking to legitimately protect their privacy and security using this technology,” Paul Grewal, chief legal officer at Coinbase, said in a statement.

“No one wants criminals to use crypto protocols, but blocking the technology entirely (which is what this sanction essentially does) is not what the people’s elected representatives authorized — especially when there are effective routes to more narrowly target bad actors,” Grewal said.

The lawsuit argues that many users turn to mixers such as Tornado Cash for lawful privacy reasons. Joseph Van Loon, an ordinary American citizen that lives in Texas, used Tornado Cash to avoid the attention of malicious actors. A similar story is true for Tyler Almeida, a senior security risk analyst at Coinbase, who anonymized his wallet address to prevent unwanted airdrops and malicious scammers.

Loading Tweet..

“The plaintiffs in this lawsuit represent a cross-section of crypto users and developers who used Tornado Cash to protect their privacy and security for various legitimate reasons,” Grewal said.  

Coinbase CEO Brian Armstrong wrote in a statement that sanctioning open source software is similar to shutting down a highway that robbers used to flee a crime scene. 

“It ends up punishing people who did nothing wrong and results in people having less privacy and security,” Armstrong said. 

As Tornado Cash is an open source, decentralized, non-custodial privacy protocol on a blockchain, it can not be controlled by any individual or group of individuals. The lawsuit suggests that sanctioning the protocol is essentially sanctioning open source technology, a move which Armstrong said will have “a chilling effect on innovation.”

“Developers are worried that they could be held responsible for something they had nothing to do with, and no ability to control,” Armstrong said. “At a time when we should be encouraging innovation, this kind of fear and uncertainty will do the opposite — making developers wonder if, by pushing the industry forward, they could be putting themselves at risk.”


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Decoding crypto and the markets. Daily, with Byron Gilliam.

Upcoming Events

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

Flashnote Template (41).png

Research

We believe that few tokens at the application layer are diverging more from fundamentals than ZORA. Its fully-diluted P/S sits at 90x, pricing significant growth despite a consistent decline in weekly revenues since late July. We foresee an 80% decrease in protocol net margins due to a recent update to the fee structure that reduces trading fees from 3% to 1%, while boosting creators’ portion of the fee split. ZORA’s supply overhang also represents a near-term headwind, with 45% of ZORA’s supply (4.5B tokens or $350M at current prices) earmarked for the team & investors beginning to unlock on October 23, 2025 (36-month linear vesting schedule).

article-image

Insiders have the best information — markets should be willing to pay for it

article-image

The CFTC-regulated exchange is opening doors to crypto builders and traders through grants, partnerships, and new deposit options

by Blockworks /
article-image

DFS tells banking organizations to integrate blockchain monitoring tools to curb money laundering and sanctions risks

by Blockworks /
article-image

New short and long-term priorities include L1 gas boosts, ZK-EVMs, privacy reads, and a lean, quantum-resistant Ethereum

by Blockworks /
article-image

The new stBTC token redistributes Bitcoin gas fees to users, creating liquid yield without inflation or lockups

by Blockworks /
article-image

The reserve will collect protocol revenues to back W token, alongside new yield and unlock schedule

by Blockworks /