According to a recent report, US authorities have made progress in imposing sanctions regarding cryptocurrencies.
Office of Foreign Assets Control (OFAC) The United States Department of the Treasury is responsible for enforcing the sanctions. However, in recent years, sanctioned individuals have started using cryptocurrencies to circumvent their financial restrictions.
Now, Over the past two years, OFAC has gained experience In the management of cryptocurrency services that facilitate illegal transactions. A recent report from Chainalysis details three use cases that will help inform OFAC.
One case involves Hydra, A dark web marketplace offering services for money laundering hackers, in addition to facilitating the sale of drugs. Its servers were located in Germany, despite being based in Russia.
After Hydra was designated by OFAC in April 2022, German law enforcement later seized these servers, in coordination with US authorities. According to the report, the case shows that “Sanctions can be extremely effective Against entities having major operations in co-operative courts.
lack of cooperation
Others, The officers have also gained experience in dealing with the designated entities. Based on uncooperative areas. OFAC approved exchange Hydra as well as the high-risk Garantex for similar money laundering activity.
Unlike the other Russia-based entity, however, Garantex was not seized over its designation and continues to operate.
Although largely separate from the supported Exchange ecosystem, Garantex still maintains a large user base in Russia, where the government is also unwilling to implement US sanctions. This case demonstrates the difficulty of enforcing sanctions in countries that do not have formal channels of cooperation with OFAC.
more complex cases
In addition to dealing with variable cooperation in various jurisdictions, OFAC was challenged by the technology that facilitates cryptocurrencies, Until recently, OFAC only had designated centralized exchanges or individual wallets.
However, the decentralized mixing service Tornado Cash becomes first DeFi protocol when OFAC designates it In August and November 2022.
After designating Tornado Cash as primarily facilitating money laundering, OFAC managed to take down its front-end website. Even then, with him back-end uses a decentralized system smart contract that are running Indefinitely, it is not clear how to prevent it from working effectively. This has raised questions about the feasibility of approving DeFi protocols, as well as who the authorities can hold responsible.
As a result, the report states that embargo act More like a tool against decentralized services to discourage the use, that as a restriction. In the case of Tornado Cash, it appears to be effective, as its revenue dropped 68% in the 30 days following its placement.
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