The Treasury has laid the groundwork to add specific wallet addresses to its SDN List, but the efficacy of the department’s approach is questionable.
On March 19, 2018, the US Department of the Treasury issued guidance regarding virtual currency sanctions levied by its Office of Foreign Assets Control (OFAC), explaining that OFAC may add specific digital currency addresses to the Specially Designated Nationals (SDN) List. The guidance occurred on the same day that President Trump issued an executive order sanctioning the Venezuelan petro cryptocurrency.
“The digital currency address field on the SDN List provides the unique alphanumeric identifiers (up to 256 characters) for digital currency addresses and identifies the digital currency to which the address corresponds,” the guidance explained.
The Treasury noted the names of some of the most famous cryptocurrencies and their ticker symbols as examples. They included bitcoin (BTC), Ether (ETH), Litecoin (LTC), Neo (NEO), Dash (DASH), Ripple (XRP), Iota (MIOTA), Monero (XMR), and petro (PTR).
Still, the listings are “not likely to be exhaustive” and the department encouraged bystanders who identify wallets owned by SDNs to “block the relevant digital currency and file a report with OFAC.” The Treasury highlighted the importance of companies and exchanges developing “tailored, risk-based compliance program[s],” but noted that “there is no single … solution suitable for every circumstance.”
It’s not immediately clear whether the agency will expand its list as more blacklisted addresses continue to transact with other addresses not yet on OFAC’s radar. The Treasury may also have to contend with cryptocurrency tumblers and mixing services, which would complicate its sanction efforts.
In addition to its OFAC guidance, the Treasury also provided definitions of “virtual currency,” “digital currency,” “digital currency wallet,” and “digital currency address.”
Virtual Currency: “a digital representation of value that functions as (i) a medium of exchange; (ii) a unit of account; and/or (iii) a store of value; is neither issued nor guaranteed by any jurisdiction; and does not have legal tender status in any jurisdiction.”
Digital Currency: “includes sovereign cryptocurrency, virtual currency (non-fiat), and a digital representation of fiat currency.”
Digital Currency Wallet: “a software application (or other mechanism) that provides a means for holding, storing, and transferring digital currency.”
Digital Currency Address: “an alphanumeric identifier that represents a potential destination for a digital currency transfer.”
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