by Britt Mosman, David Mortlock, Elizabeth P. Gray, J. Christopher Giancarlo, and Samuel Hall
In recent years, the U.S. government has become increasingly focused on regulating the use of virtual currencies as a means of addressing a host of financial crimes and malign activities. As entities and individuals (“persons”) in this space find themselves subject to various, sometimes overlapping regulatory regimes, the compliance environment has become increasingly treacherous. One area of particular concern for those dealing with cryptocurrencies is U.S. economic sanctions, as is evidenced by the recent settlement between the Treasury Department’s Office of Foreign Assets Control (“OFAC”) and BitPay Inc. (“BitPay”), discussed below. Indeed, sanctions hold some of the most complicated compliance issues in one hand, and some of the largest penalties in the other, and they do not always—or perhaps rarely—fit cryptocurrency transactions neatly.
This post provides an overview of sanctions compliance principles for the cryptocurrency industry and discusses some key issues of which persons in the crypto space should be mindful, including:
- Sanctioned coins, persons, and regions;
- Restricted transactions; and
- Recommendations for compliance.
As this post makes clear, some of the relevant prohibitions remain ambiguous and leave significant questions unanswered. In turn, some crypto transactions and related regulations may warrant license and guidance requests to OFAC or even legal challenges, including Administrative Procedure Act (“APA”) challenges, in U.S. courts to resolve those ambiguities. But at a minimum, there are certain basic steps that should be taken to comply with U.S. sanctions.
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