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‘Borderless’ crypto networks wrestle with state sanction compliance



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The United States’ financial sanctions against countries like Iran create a messy regulatory environment where cryptocurrency startups have to pick their battles carefully. So far, the battles these companies aren’t picking are having real effects on users and can sometimes directly contradict the company’s alleged decentralization philosophy.
“Something will come down on someone. We just don’t know where or when these regulations will be tested,” said Larry Florio, general counsel at Syndicate, a company focused on enabling “decentralized autonomous organizations” (DAOs) for tech-savvy collectives.
For a previous example, the crypto custody startup BitGo was penalized in 2020 by the Office of Foreign Assets Control (OFAC) for failing “to implement controls designed to prevent” interacting with users from sanctioned jurisdictions. Basically, BitGo is almost like a crypto bank; it helps store clients’ assets in secure vaults. And the legal penalty came when some of those clients may have received cryptocurrency from individuals in sanctioned jurisdictions. OFAC showed this is not allowed under U.S. sanctions. Along those sa …

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