The US will continue to blacklist Bitcoin addresses, analysts say

Chainalysis, a Blockchain analysis firm, warns that there will be an escalation in crackdowns linked to cryptocurrencies since the U.S government is giving close attention to activities that are associated with Bitcoin and other cryptocurrencies being used by criminal elements.

The U.S. Treasury Department, on Wednesday, issued sanctions on alleged Chinese “drug kingpins” who was determined to have been using Bitcoin to gather their profits from their illegal business. 

As of this week, eleven Bitcoin addresses and one Litecoin address was added to the list of Specially Designated Nationals by The Treasury’s Office of Foreign Assets Control or also known as OFAC. This is to ensure that there is no U.S person that can have any business contact with any of these blacklisted addresses.

This is the second time that bitcoin addresses got blacklisted in the list of address of OFAC, and the first one was made last year against two Iranian citizens last November. According to Jesse Spiro, Chainalysis Global Head of Policy, these actions are only the beginning.

Spiro said that they anticipated further actions by OFAC, this is to include additional cryptocurrency addresses that are associated with these individuals and another cryptocurrency that is involved with illegal trafficking of narcotics.

“We anticipate further action by OFAC to include additional cryptocurrency addresses attributed to these individuals and others that are involved in narcotics trafficking going forward,” he said

He also added that there should be strict implementation when it comes to the demonstration of strict cryptocurrency compliance programs to immediately identify “high-risk” activity.

Juan Llanos, a compliance expert, agreed that we could expect to see more blacklisting of Bitcoin addresses in the near future. This is largely due to what he calls “the nature of open blockchains,” he said.

To prevent the amount of cryptocurrency lost in security breaches, they need to have the ability to quickly detect and manage questionable transaction that is happening in its jurisdiction. This ability can make a major impact on the way how bitcoin and other cryptocurrencies manage their system. The firm specializes in tools that the government agencies and other companies are currently using, one of such is cryptocurrency exchanges. 

Chainalysis VP John Dempsey said: “As lawmakers and regulators focus their attention on the industry, it is more critical than ever that cryptocurrency businesses demonstrate compliance best practices.” 

He also added that when it comes to managing exposure to sanctioned accounts and hacked funds, every minute matters that are associated with the dark web, and other activities that do not follow the standards.

A civil penalty up to $10 million as well as criminal charges will be filed to anyone who violates these sanctions. Financial institutions subject to U.S jurisdiction are obligated to screen for blocked persons, Llanos explained.

OFAC and FinCen are making an extra effort on blacklisting cryptocurrency addresses that are not following the protocol; this will put a heavy burden on criminals and criminal organization by pinning down their movements when it comes to access on cryptocurrencies.

Spiro noted that having these procedures implemented the exchange, and institutions can work hand in hand with the government and law enforcement in detecting and preventing such activities. 

This will control the flow of cryptocurrencies and will notify them if there are any malicious transactions that are happening; thus the law enforcement agency or the government can plan and reprimand individuals who do not abide the law of transactions using cryptocurrency. Possible criminal penalties of a $5 million fine and up to 30 years in prison in addition Individuals who violate the Kingpin Act might face civil penalties of a $1.1 million fine per violation.

The Kingpin Act according to the White House was designed to “deny significant foreign narcotics traffickers, their related businesses, and their operatives access to the U.S. financial system and to prohibit all trade and transactions between the traffickers and U.S. companies and individuals.”

This will control the flow of transactions and limiting the number of illegal trade that can occur by means of cryptocurrency. With this law, the number of “kingpins” will be limited and when a transaction is deemed to be illegal, an official will have a much easier time locating them and pursuing the wrongdoers since they used cryptocurrency as a form of payment for their transactions.

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