OFAC, the Office of Foreign Assets Control, is the financial intelligence and enforcement agency of the U.S. Treasury Department that administers and enforces economic and trade sanctions. On March 19, 2018, the OFAC updated its FAQs to include a section on virtual currency. In the new section, OFAC provides guidance about the various money laundering and terrorist financing risks associated with virtual currency, and goes on to state that it will use sanctions to “fight against criminal and other malicious actors abusing digital currencies and emerging payment systems.” One of the strategies under consideration is the inclusion of digital currency addresses associated with blocked persons to OFAC’s SDN List.
Should OFAC add digital currency addresses to the SDN List, parties will be on notice that those addresses are affiliated with sanctioned persons, and payments through such means may result in a violation of OFAC regulations. OFAC’s plans represent another step in the march towards fully regulating virtual currency operations. Little by little, virtual currencies are being brought under existing regulatory schemes or new schemes (like the New York BitLicense) are being created to cover perceived gaps. The addition of digital currency addresses to the SDN List will mean greater risk for companies and a matching increase in compliance cost.