Agencies like the Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury and its equivalents in other countries implement sanctions through the targeting of countries, regimes, individuals, and entities that are considered threats to national security and foreign policy. Traditionally, sanctions enforcement relies on the cooperation of mainstream financial institutions, but some bad actors have turned to cryptocurrency to circumvent these third party intermediaries, giving policymakers and sanctioning bodies new challenges with which to grapple. However, cryptocurrency’s inherent transparency, along with the willingness of compliant cryptocurrency services — in particular, the many centralized exchanges that function as the link between crypto and fiat — have demonstrated that sanctions enforcement is possible in the crypto world.
In this section, we’ll look at how the U.S. government’s crypto-related sanctions strategy has evolved over time, examine the types of entities that it has sanctioned so far, and analyze the impact of those sanctions on the entities themselves and the wider crypto crime ecosystem.
OFAC’s cryptocurrency-related sanctions are on the rise since 2021
2018 saw OFAC’s first crypto-related sanctions, when it designated two Iranian nationals associated with the SamSam ransomware strain and included Bitcoin addresses linked to the individuals as identifiers on their Specially Designated Nationals And Blocked Persons (SDN) List entries. For the next two years, virtually all cryptocurrency addresses included as sanctions identifiers were personal wallet addresses controlled by individuals, with an average of two addresses per crypto-related designation in 2018, four in 2019, and nine in 2020.