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The U.S. sanctions watchdog is honing in on the crypto industry.
On October 15, the Treasury’s Office of Foreign Asset Control (OFAC) released a new brochure with crypto-specific guidance on navigating U.S. sanctions.
The actual contents of the guidance are not especially revolutionary, but largely push the idea that OFAC expects virtual currency operators to shoulder the same responsibility for avoiding sanctions violations as other financial institutions. The guidance reads:
“As a general matter, U.S. persons, including members of the virtual currency industry, are responsible for ensuring they do not engage in unauthorized transactions or dealings with sanctioned persons or jurisdictions.”
OFAC names a range of actors that must develop risk-assessment programs, including “technology companies, exchangers, administrators, miners, and wallet providers, as well as more traditional financial institutions that may have exposure to virtual currencies or their service providers.”
Perhaps most interesting is that OFAC highlights geolocation of IP addresses and, specifically, analytical tools available to identify use of a VPN as part of its expectations. Geofencing by crypto exchanges and operators is an expanding practice, but use of a VPN can circumvent almost all of these barriers to trading. Heightened OFAC scrutiny on VPNs could dramatically alter the level of access that people in the U.S. have to platforms that are they are legally barred from using.
Since first targeting cryptocurrency wallet addresses in 2020, OFAC has become increasingly involved in the crypto industry. At the end of September, it announced its first-ever sanctions on a crypto exchange, a Russia-based OTC desk called Suex.
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