The future of U.S. crypto sanctions

The future of U.S. crypto sanctions

Blockchain analytics firm Chainalysis published an intriguing report this morning that highlights how the Office of Foreign Assets Control (OFAC)—an arm of the Treasury Department that deploys financial sanctions to squeeze U.S. enemies around the world—has become more adept at targeting crypto activity.

The report includes data on how OFAC is going after the crypto wallets of a growing range of bad guys from ransomware crooks to terrorist financiers to those meddling in democratic elections. More intriguingly, it also points out that, in the last two years, OFAC has slapped sanctions not only on individuals but on corporate and national entities too. The latter includes the now-defunct dark web market Hydra as well as North Korea’s infamous Lazarus Group, a team of hackers that carries out sophisticated cyber and crypto robberies to support the dictatorship’s military.

Meanwhile, the Chainalysis report also looks at whether OFAC slapping sanctions on crypto entities deters criminal activity. In the case of the rogue Russian crypto exchange Garantax, the answer appears to be “not really” since the country’s lawless regime and the customers using the service don’t care about OFAC designations in the first place.

The report comes to a different conclusion, however, in the case of Tornado Cash, an open-source protocol touted as a privacy tool that lets anyone “mix” Ethereum coins and conceal their provenance. OFAC added the service to its blacklist last August, which forced the operator of the service’s front-end website to shut it down. According to Chainalysis, this led to fewer criminals (as identified by their wallet address) using Tornado Cash.

The problem, as the report acknowledges, is that the underlying Tornado Cash protocol remains operational since it is not tied to a specific company or individual who can pull the plug—rather it is software that no one really controls. This means that whatever OFAC’s ambitions it may be confronting a technology beyond its reach. In the meantime, the agency has also angered law-abiding users who view Tornado Cash as a legitimate tool to protect privacy in an age of growing financial surveillance.

Finally, Friday’s newsletter about Taylor Lorenz’s story on crypto and influencers touched a nerve with readers. A number of people wrote to say my sentiment was bang-on (thank you!), but others, including Lorenz, took to Twitter to angrily complain that my comment that she had made her name writing about teen trends was patronizing and dismissive. I spoke to Lorenz after the episode, and, as often happens in the wake of a social media blowup, found her to be very friendly and reasonable—and understandably upset that my description may have minimized the very brave work she has done reporting on the far right and other nasty elements of the internet. Rest assured that was not my intention. Onward.

Jeff John Roberts


The Justice Department and the Securities and Exchange Commission are reportedly investigating whether loans made by trading firm Genesis to its parent company Digital Currency Group were improper. (Bloomberg)

Bitcoin prices are holding well above $17,000 in the wake of positive macroeconomic news. (Coindesk)

Federal prosecutors in Seattle have issued subpoenas to U.S. hedge funds over their dealings with Binance. (Washington Post)

An Ohio man, who was sentenced for robbing Bitcoins from a wallet the IRS had seized from his brother, spent $122,000 of the loot to swim in a pool of $1 bills alongside strippers. (Coindesk)

Ethereum developers agreed that the top priority for the next major upgrade of the network, named “Shanghai” and slated for March, will be to let customers withdraw staked coins. (The Block)


While you’re waiting for the SBF mini-series:

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