Cryptocurrency tumblers are legal again… for the moment

A U.S. federal Court of Appeals ruled on Tuesday that the government’s sanctions against Tornado Cash, a company that anonymizes cryptocurrency transactions by mixing them with other funds through a process known as tumbling, should be overturned. The court found that the government didn’t have the proper tools to include the technology underpinning the service as a sanctioned entity.

The ruling, in response to a complaint brought against the government backed by Coinbase, overturns the decision by a district court last August, which had aligned with the government’s criteria regarding the sanctions initially decreed by the Office of Foreign Assets Control (OFAC) on the grounds that it was used by organized crime groups and bad actors such as North Korea’s Lazarus Group to launder stolen crypto tokens. The appeals court ruled that a technology cannot be sanctioned simply because it is can used for criminal purposes.

The decision will have major repercussions for cryptocurrencies, open-source technologies and financial privacy in general. First, it sets clear boundaries for government authority, determining that the Treasury Department overreached by sanctioning software code, rather than going after the people who allegedly used it to commit crimes. In addition, people cannot be prohibited from copying open source code and…