Van Loon v. Department of the Treasury: Key Implications for Bitcoin

The recent decision by the U.S. Court of Appeals for the Fifth Circuit in Van Loon v. Department of the Treasury is making waves in the Bitcoin world. Bitcoin advocates have been closely following this case, and for good reason – it has big implications for the future of Bitcoin. Essentially, the court’s ruling stops the federal government from banning Bitcoin under certain acts, easing concerns that Bitcoin supporters have had for some time.

In Van Loon, the Office of Foreign Assets Control (OFAC) imposed sanctions on Tornado Cash, a crypto-transaction software protocol that allows for anonymous transactions. These sanctions were put in place because malicious cyber actors, like the North Korea-linked Lazarus Group, were using Tornado Cash to launder money from cybercrimes. OFAC banned dealings with Tornado Cash’s smart contracts, which are essentially software running on the Ethereum blockchain.

The smart contracts in question were immutable, meaning they couldn’t be altered or removed. A group of Tornado Cash users challenged these sanctions, arguing that OFAC didn’t have the power to impose them because the smart contracts aren’t considered “property.” The Fifth Circuit agreed, stating that the smart contracts couldn’t be owned or controlled, making them outside of OFAC’s reach.

The court looked at two key statutes in their decision – the International Emergency Economic Powers Act (IEEPA) and the North Korea Sanctions and Policy Enhancement Act (NKSPEA). These acts give the President the power to block property associated with national security threats. In this case, the Fifth Circuit ruled that the immutable smart contracts weren’t considered property under these acts because they couldn’t be owned or controlled.

This decision has significant implications for the future of Bitcoin and other crypto assets. It sets a precedent that could prevent the government from banning Bitcoin under similar acts in the future. Bitcoin advocates are breathing a sigh of relief after this ruling, as it provides some clarity and protection for the crypto community.