Can you impose sanctions on a Cryptocurrency Exchange?

September 23, 2021 Novum Alpha 0
  • U.S. Treasury Department imposes sanctions on cryptocurrency exchange 
  • Unclear if the sanctions will have any discernible effect on the activity of the offshore entity
 
It’s no big secret that centralized exchanges remain one of the biggest targets for authorities looking to stem illicit flows or crackdown on money laundering allegedly facilitated by cryptocurrencies.
 
In a novel approach, the U.S. Treasury Department has imposed sanctions on a cryptocurrency exchange that it says allowed ransomware hackers to launder extortion payments from victims.
 
Working in conjunction with the FBI, the U.S. Treasury’s Office of Foreign Assets Control announced the curbs on an exchange called SUEX, which it alleges deliberately “facilitated illicit activities for own illicit gains.”
 
The sanctions are aimed at blocking U.S. citizens and companies from transacting with SUEX, on pain of penalties such as fines.
 
Whether or not the sanctions will ultimately bite is a different story altogether.
 
Authorities across many jurisdictions have struggled to bar their citizens from accessing unregulated cryptocurrency exchanges.
 
In June, the U.K.’s Financial Conduct Authority (the equivalent of the U.S. Securities and Exchange Commission), wrote that it was not capable of exercising any meaningful discipline or oversight of the world’s largest cryptocurrency exchange by traded volume, Binance.
 
And multiple jurisdictions which have either banned specific cryptocurrency exchanges or barred their citizens from accessing them, have seen those barriers circumvented through the use of virtual private networks (which obscure the geographical location of a user’s IP address) or other means.
 
Nonetheless, it will be interesting to see whether the Treasury’s initiative to sanction SUEX will bite and what it means for cryptocurrency exchanges in general.
 
According to the U.S. Treasury Department, some 40% of SUEX’s transactions can be linked to illicit actors, while the company is alleged to have facilitated the laundering of funds from over eight known ransomware attacks.
 
Wally Adeyemo, deputy secretary of the U.S. Treasury has said the agency is also “investigating” the role of mixers – third party services that mix in illicit cryptocurrency flows with legitimate ones, before redistributing them, to obfuscate their sources and destinations.
 
Mixers are not entirely full proof, with a rising number of blockchain data analytics companies and the FBI able to track back cryptocurrency flows to their sources in many cases.
 
During the Polychain Network hack, Chainalysis, as well as Elliptic, two leading blockchain data analytics companies, were able to detect that the hacker had sent some of the stolen cryptocurrency into mixers.
 
 

Novum Digital Asset Alpha is a digital asset quantitative trading firm.

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Novum Digital Asset Alpha is a digital asset quantitative trading firm.

Exclusive access to Novum Digital Asset Alpha’s Daily Analysis is made in conjunction with Bitcoin Malaysia.

The information and thoughts laid out in this analysis are strictly for information purposes only and should not be regarded as an offer to sell or a solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be in violation of any local laws.

It does not constitute a recommendation or take into account the particular allocation objectives, financial conditions, or needs of specific individuals.

For more information about Novum Digital Asset Alpha, please click on the image below:

Energy Efficient Ethereum? What will they think of next?

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