The US government was busiest enforcing bank restrictions pertaining to cryptoasset activity during the final week of March. The Office of Foreign Assets Control (OFAC) of the US Department of the Treasury launched four distinct initiatives to penalize threat actors that it claims have engaged in behaviors such as supporting terrorist organizations, evading sanctions, and running internet disinformation campaigns.
The Four Sanctions Actions
Ilya Andreevich Gambashidze:
Ilya Andreevich Gambashidze was added by OFAC to its Specially Designated Nationals and Blocked Persons List (SDN List) on March 20.
Through the Social Design Agency (SDA), a company he founded in Moscow, Gambashidze has spearheaded attempts on behalf of the Russian government to disseminate false information throughout the world by using social media campaigns and fake news websites. Gambashidze controls two Tether addresses, which OFAC listed on the SDN List as part of the case.
Blockchain-Based Services Evading Sanctions:
13 organizations and 2 people were sanctioned by OFAC on March 25 for creating and running blockchain-based services with the intention of avoiding sanctions against Russia.
Among them are the cryptocurrency exchanges Bitpapa and NetExchange, which OFAC claims enabled transactions on behalf of other blacklisted companies connected to Russia.
Although Elliptic has independently discovered thousands of cryptoasset addresses controlled by these businesses, OFAC did not list any addresses belonging to them on the SDN List.
Tawfiq Muhammad Sa’id Al-Law:
Tawfiq Muhammad Sa’id Al-Law received sanctions from OFAC on March 26 for giving material assistance to Hizballah, a group that has been classified as a terrorist organization.
Hizballah received cryptocurrency wallets from Al-Law, a Syrian resident living in Lebanon, which it used to acquire money from the Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF).
Additionally, OFAC claims that Al-Law sent direct financial support to senior Hizballah leaders under US sanctions as well as financial support via cryptocurrency to a Syrian firm blacklisted by OFAC.
Al-Law’s Tether address was added to the SDN List by OFAC as part of the action.
Gaza Now:
After the attack on Israel on October 7, 2023, an online fundraising effort called Gaza Now was launched. On March 27, OFAC sanctioned the campaign, which was situated in Gaza and aimed to generate money for Hamas, a recognized terrorist group.
A number of Tether, Ethereum, and Bitcoin addresses under Gaza Now control were added by OFAC on the SDN List.
On the same day, penalties were also announced on Gaza Now and its founders by the UK’s Office of Financial penalties Implementation (OFSI).
The Push for Expanded Powers
The US Treasury Department is pushing for more regulatory powers, citing national security concerns as the reason for stepping up its efforts to counteract illicit activities made possible by digital currencies. Adewale O. Adeyemo, the deputy secretary of the Treasury, has emphasized the importance of taking swift action against cybercriminals who use cryptocurrency technology outside the purview of conventional financial regulations.
Why the Push?
Evolving Threats: Money-raising and transfer methods are constantly changing, and many current laws haven’t been revised in years.
Terrorist Exploitation: New virtual techniques are used by terrorist organizations, such as Hamas, to transport, store, and conceal their financial sources. These techniques frequently entail using mixers and other deceptive bitcoin networks and services.
Proposed Measures:
Secondary Sanctions Tool: Congress ought to provide the Treasury with a fresh mechanism for secondary penalties directed at exchanges that facilitate the financing of terrorism. This would give the Treasury the same authority over virtual asset providers as it does over correspondent banking accounts.
Bank Secrecy Act (BSA) Enhancements: Expanding the department’s authority under the BSA would make it possible to target cryptocurrency businesses and services that help terrorists obtain money.
Political Challenges:
Adeyemo contends that Senator Elizabeth Warren’s story oversimplifies the regulatory environment and possible risks, notwithstanding her opposition to cryptocurrencies.
The use of digital assets by state actors such as North Korea, Iran, and Russia highlights the geopolitical nature of cryptocurrency regulation.
Balancing Act:
The proposed regulatory framework seeks to maintain the dynamic nature of the digital economy while permitting real-time surveillance of bitcoin transactions. This is known as the “balancing act.”
Adeyemo concedes that innovation and regulation will always conflict.
The Treasury Department shows its commitment to safeguarding national interests in a world that is becoming more linked by taking this proactive stance.
