OFAC Continues to Demonstrate Greater Interest in Cryptocurrency Regulation and Enforcement
With the widespread arrival of Initial Coin Offerings (“ICOs”) over the last several years,1 U.S. authorities have made deliberate progress toward keeping pace with the fast-growing crypto industry.2 The Department of Treasury’s Office of Foreign Assets Control (“OFAC”) has arguably been slower to action than either the U.S. Department of Justice (“DOJ”) or the U.S. Securities and Exchange Commission (“SEC”), both of which have taken an aggressive approach resulting in high-dollar settlements.3 With that said, however, OFAC has more recently taken steps that suggest cryptocurrency regulation and enforcement will be a high-priority item moving forward.
I. OFAC’s Historical Regulation of Cryptocurrency
OFAC first demonstrated its interest in regulating cryptocurrency in January 2018 after Venezuela announced its plans to launch a state-sponsored digital coin called the petro.4 In response to this offering, OFAC published an FAQ admonishing that, “U.S. persons that deal in the prospective Venezuelan digital currency may be exposed to U.S. sanctions risk.”5 This guidance was quickly supplemented by President Trump’s Executive Order 13827, issued in March of 2018.6 The Executive Order went further than OFAC’s admonition, expressly prohibiting all U.S. persons from transacting in or financing any digital currency, coin, or token issued by the Venezuelan government.7