US Treasury Could Include Cryptocurrency Wallets, Addresses on Sanctions Hit List


Most recently, the US Department of the Treasury has revealed it is considering adding digital-wallet addresses to its growing list of sanctions, but only if they can link the wallet address to someone who has been blocked.

According to the documents, the Office of Foreign Assets Control would include the electronic wallet addresses «to alert the public of specific digital currency identifiers associated with a blocked individual.» They added that the record of cryptocurrency addresses is «not likely to be exhaustive.»

It seems like another way to enforce know-your-customer (KYC) standards -

«Parties who identify digital money identifiers or wallets that they believe are possessed by, or otherwise associated with, an [specially designated nationals] and maintain such property should take the necessary steps to block the relevant digital money and file a report with OFAC that contains information regarding the wallet's or address's possession, and any other pertinent details,» the document states.

The sanctions against blocked people would be utilised along with other instruments, the agency relies on to combat crime, including illegal transactions with cryptocurrencies.

The digital address is a set of letters and numbers associated with an electronic wallet that dictate where cryptocurrencies wind up, with no need for a bank of payments platform.

A former government adviser told The Wall Street Journal that wallet addresses are the best tool regulators have got to uncover fraud. Once a lousy actor knows their wallet address has made the sanctions list, they may ditch it for another one. But at that stage, financial entities may use the blacklisted address for clues to identify another one.

The mechanics of sanctions on cryptocurrency wallet addresses work like those used in the transport business, as an example. In that case, ships or other properties are blacklisted.

«Just like in the case of vessels, [Treasury] will identify specific species of electronic money as being issued by prohibited actors,» Paul Hastings lawyer Scott Flicker told the WSJ. But while the sanctions can lead to illegal funds, they may fall short in uncovering the perpetrators of the fraud.

«A new address is generated every time a digital money user requests money so these addresses.. .will be those that were used once and will never be used again,» another attorney pointed out in the WSJ story.