On November 26, the U.S. Court of Appeals for the Fifth Circuit reversed and remanded a decision by the district court regarding the Office of Foreign Assets Control’s (OFAC) designation of a virtual currency mixer software as a Specially Designated National and Blocked Person (SDN) pursuant to the International Emergency Economic Powers Act (IEEPA). The IEEPA permits the President to block “any property in which any foreign country or a national thereof has any interest.” In this instance, President Obama authorized the Treasury to block “the property and interests” of persons that it determined supported North Korea or its pursuit of nuclear weapons and to block the “property and interests” for persons engaged in “cyber-enabled activities” that threaten the national security and economy of the U.S. The Treasury delegated this authority to OFAC, and OFAC designated the software as an SDN.

The plaintiffs argued that OFAC exceeded its statutory authority by designating the software as a SDN, claiming that the smart contracts created by the software did not meet the definition of “property” outlined in the IEEPA and the Administrative Procedure Act (APA). The district court held that the software was an entity that could be properly designated, and that smart contracts constituted “property” under the IEEPA. The 5th Circuit, citing Loper Bright v. Raimondo, engaged in its own analysis of the statute and concluded that the immutable smart contracts associated with the software, which facilitated anonymous cryptocurrency transactions, do not qualify as “property” under the IEEPA because they are not capable of being owned, and thus cannot be blocked under the IEEPA. The court’s ruling instructed the district court to grant the plaintiffs’ partial motion for summary judgment based on the APA.