U.S. Can Now Sanction Individuals in Iran’s Crypto Sector

The U.S. government has granted Treasury’s Office of Foreign Assets Control, in coordination with the State Department, authority to designate and sanction individuals and firms involved in Iran-related cryptocurrency activity. The authority allows officials to block assets, restrict transactions by U.S. persons and place names on U.S. sanctions lists.

Under the authority, designations may cover individuals, virtual asset service providers, miners, wallet operators, brokers and other parties that facilitate crypto transactions tied to Iran or that help evade existing sanctions. Designations generally result in asset freezes for property in U.S. jurisdiction and bar most dealings by U.S. persons with the designated targets.

Enforcement tools available under the authority include adding targets to the Treasury’s Specially Designated Nationals list, issuing licenses or guidance that define permitted activity, and applying secondary restrictions that can affect non-U.S. firms that do business with designated parties. U.S. agencies can also work with private-sector blockchain analytics firms to trace transactions and identify networks used to move value.

The policy affects a range of actors. Cryptocurrency exchanges that process flows linked to Iran or maintain business relationships with Iranian users face increased compliance requirements and enforcement risk. Individual developers, miners operating in Iran, providers of mixing services, custodial wallets used to obscure transaction provenance and intermediaries that convert crypto to fiat could be subject to designation if tied to activity targeted by U.S. sanctions.

Banks, payment processors and non-U.S. crypto firms that engage with flagged parties may face secondary sanctions or a loss of access to the U.S. financial system. The authority enables officials to limit touchpoints that previously allowed value to move across borders using digital assets.

U.S. concerns about digital assets and sanctions evasion have driven the policy change. Iran maintains a domestic crypto-mining industry and has permitted some cryptocurrency activity that can be used to work around restrictions on its banking system. U.S. authorities have previously pursued actions against Iranian cyber actors and entities tied to sanctions evasion; the current authority extends those efforts to enable targeted actions against individual operators in the digital-asset sector.

Exchanges and service providers that wish to maintain access to U.S. markets or correspondent banking will likely enhance know-your-customer checks and transaction monitoring for blockchain indicators associated with Iran. At the same time, certain privacy-enhancing tools and direct peer-to-peer channels may present enforcement challenges for authorities tracking illicit transfers.

Sanctions under the new authority will be applied on a case-by-case basis to individuals and entities found to be facilitating prohibited activity involving Iran and virtual assets.