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A paper by the Harvard University's Matthew Ferranti explores the potential for Bitcoin to serve as an alternative central bank reserve currency asset to ex-ante hedge against the risk of financial sanctions. It uses a dynamic Bayesian copula model to simulate the joint returns of Bitcoin and other reserve assets under a wide range of plausible sanctions probabilities. Assuming mean-variance preferences, a modest risk of sanctions significantly increases optimal gold and Bitcoin allocations. If a central bank cannot acquire sufficient physical gold to hedge its sanctions risk, the optimal Bitcoin share rises further, suggesting that gold and Bitcoin are imperfect substitutes. It concludes that sanctions risk may diminish the appeal of US Treasuries, propel broader diversification in central bank reserves, and bolster the long-run fundamental value of both cryptocurrency and gold.

The Federal Reserve Bank of New York (NY Fed) published a study of the impact and effectiveness of regulation in decentralized systems, using sanctions imposed in 2022 by the U.S. Department of Treasury's Office of Foreign Assets Control (OFAC) on the Tornado Cash (TC) crypto-asset mixer. It documented an immediate and lasting negative impact on TC following the sanction announcement. This conclusion was based on tracking Ethereum block proposers and the builders responsible for selecting transactions for settlement. Many large builders cooperated with the sanctions. A couple of builders who did not comply with the sanctions, acting for philosophical reasons rather than monetary motives, were responsible for most of the ongoing TC transactions. https://www.newyorkfed.org/research/staff_reports/sr1112.html

In sum, the case for bitcoin as a sanctions buster is not clear-cut. Genuine evil leaders probably should be sanctioned, the less ways to short-circuit the blockade the better. And given the way that U.S. sanctions are structured, bitcoin may not provide much help anyways.

It's not clear that the Tornado mixer sanctions actually outlaw reciting code, but they do include what appears to be the first-ever ban on interacting with blockchain addresses controlled by self-executing code (sanctions normally ban transactions with accounts controlled by specific people or entities). And as crypto advocates mull legal challenges to the sanctions, they're homing in on First Amendment objections. A showdown over the constitutionality of the sanctions would reopen decades-old questions about the legal status of code. In all likelihood, it would be just the first major skirmish in a broader fight over the First Amendment's application to blockchain systems, one that crypto advocates have been anticipating for years.

Iran is using Bitcoin mining to circumvent and lessen the effect of the economic sanctions that the U.S. and other countries have applied to the country since 2006, according to a new study by Elliptic. The country is indirectly using bitcoin mining to export part of its energy reserves, whose exports are being hampered by the said sanctions.

The US Treasury Department Office of Foreign Asset Control (OFAC) released a new brochure with crypto-specific guidance on navigating U.S. sanction controls. It largely pushes the idea that OFAC expects virtual currency operators to shoulder the same responsibility for avoiding sanctions violations as other financial institutions. OFAC names a range of actors that must develop risk-assessment programs, including technology companies, exchangers, administrators, miners, and wallet providers, as well as more traditional financial institutions that may have exposure to virtual currencies or their service providers.

The U.S. Department of the Treasury reported that U.S. adversaries have increasingly turned away from the U.S. dollar to facilitate their transactions as American sanctions seek to target everything from Iranian oil sales to individuals accused of human rights abuses. The report cited rising risks from new payment systems, and the advent of digital assets, and called for a more multilateral approach to sanctions policy at the Treasury, in order to keep up with changes in the global financial system.

The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) sanctioned Tornado Cash, a crypto-asset mixer that mixes potentially identifiable or "tainted" cryptocurrency funds with others, so as to obscure the trail back to the fund's original source. OFAC claims that Tornado Cash has been used to launder more than $7 billion worth of virtual currency since its creation in 2019. The sanctions mean U.S. crypto investors can no longer use Tornado Cash. 38 ETH addresses and 6 USDC addresses were added to OFAC's Specially Designated Nationals (SDN) list. Circle, the issuer of the USDC stablecoin, reportedly froze over $75,000 worth of USDC funds linked to those 6 USDC addresses. Several leading figures in the crypto industry expressed their concerns about the sanctions.

Crypto privacy mixer Tornado Cash drew attention last week after the U.S. Treasury Department sanctioned the service. The implications of complying with the sanctions are starting to sink in with the rest of the industry, raising questions about just what compliance looks like.

"The U.S. Department of the Treasury has answered some questions on regulatory compliance relating to Tornado Cash, a recently sanctioned crypto mixer. The answers include how to withdraw crypto or complete transactions initiated using Tornado Cash prior to its sanction and how to deal with "dusting" transactions."

On March 21, 2025, the U.S. Treasury delisted Ethereum coin mixing service Tornado Cash from its list of parties sanctioned by the Office of Foreign Assets Control (OFAC) reversing course after first blacklisting the service in 2022. The removal was actually a bit tardy because the Treasury had been required to remove it by March 17, 2025. In November, a fifth circuit judge ruled that the Treasury had overstepped its authority by targeting Tornado Cash's smart contracts. The judge wrote that autonomous software cannot be classified as property and therefore cannot be sanctioned. Subsequently, Department of Justice prosecutors asked for and given until March 17, 2025 to remove Tornado Cash from the OFAC black list.

"The future in five years, if we don't have a good answer, is basically China re-wiring" a large part of the world "with a digital renminbi running on their controlled blockchain," Marcus said. He warned about the prospect of "having a whole part of the world completely blocked from U.S. sanctions and protected from U.S. sanctions and having a new digital reserve currency" with no alternative.

Although the U.S. dollar is the world's reserve currency, the U.S.'s ability to apply strong and effective sanctions has very little to do with the U.S. dollar itself.

Chainalysis and the Wyoming's Division of Banking, the banking regulator responsible for the chartering and supervision of state banks, have teamed up to combat money laundering, sanctions violations, and other criminal activity that uses digital assets. Wyoming's watchdog will leverage Chainalysis solutions to verify the state banks' compliance with anti-money laundering, Bank Secrecy Act, know-your-customer and sanctions requirements. It will also employ Chainalysis tools to help federal and state law enforcement agencies conduct regular transaction testing and monitoring.

The US Department of Justice (DOJ) is reportedly investigating whether Binance was used illegally to let Russians skirt US sanctions and move money through the cryptocurrency exchange. Binance is also already being examined by the Internal Revenue Service (IRS) and federal prosecutors, regarding anti-money laundering obligations compliance, and the Securities and Exchange Commission (SEC) has been scrutinizing whether the exchange has supported the trading of unregistered securities.

Stablecoin issuer Tether initiated a new voluntary wallet-freezing policy designed to combat activity connected with Sanctioned persons on the Office of Foreign Assets Control (OFAC) Specially Designated Nationals (SDN) List. This adds to the Sanctions controls Tether already enforces for wallets on its platform. Tether has taken additional precautionary measures, including freezing wallets previously added to the SDN List. "The primary objective behind this approach is to proactively prevent any potential misuse of Tether tokens and enhance security measures."

A U.S. appeals court ruled that the U.S. Treasury Department's Office of Foreign Assets Control (OFAC) acted outside its authority when it sanctioned crypto-asset mixer Tornado Cash in 2022 and accused it of helping launder over $7 billion for North Korean hackers and other malicious cyber actors. Crypto-asset mixers are anonymized software tools that allow users to conceal the source or owner of digital assets. OFAC blacklisted Tornado Cash after concluding it was helping launder proceeds of cyber crimes, including more than $455 million stolen by the Lazarus Group, a North Korean government-backed hacking group. The ruling said that federal law only gave OFAC the authority to regulate property, which Tornado Cash's immutable crypto-mixing smart contracts did not constitute. https://drive.google.com/file/d/1x3im8DdYdItlP6Hw4VF5JiBV1ccuKE6X/view

Cuba's Communist government said on Tuesday it was studying the potential use of cryptocurrency as part of a series of measures to boost its economy amid a deepening crisis exacerbated by U.S. sanctions.

Palestinian Prime Minister Mohammad Shtayyeh recently announced that his government will use cryptocurrency to bypass sanctions levied by Israel.

"Central Banks should champion sCBDC. Let private providers compete in providing some sort of central bank-sanctioned version of digital currency to the masses. The central bank can limit itself to maintaining the back end and offering a degree of regulation."