What Are Sanctions, And Why Crypto Users Should Care

If you’re into crypto (or even just crypto-adjacent), you’ve probably heard “sanctions” thrown around. But what exactly are sanctions, who enforces them, and why do they matter in blockchain land? Let’s break it down.

Sanctions 101: The Basics

Sanctions are penalties imposed by governments (or sometimes groups of governments) on foreign countries, organizations, or individuals. They can include things like:

• Blocking access to financial systems.

• Prohibiting trade or transactions with specific people or companies.

• Restricting imports or exports of certain goods.

The aim is usually to influence behaviour: stop illicit activity (terrorism, weapons proliferation, human rights abuses, etc.), punish violations of international law, or deter bad actors.

In the U.S., a central agency for this is OFAC: the Office of Foreign Assets Control (part of the U.S. Treasury). OFAC develops and enforces many of the economic sanctions programs.

OFAC & Crypto: How They Apply Sanctions in the Blockchain Era

As cryptocurrencies and blockchain tech have evolved, so too have the ways people try to use them to evade sanctions. OFAC has responded in kind. Some key points:

• OFAC can designate specific digital currency addresses (wallets) as associated with sanctioned persons/entities. If a wallet is designated, generally that wallet’s assets are blocked and U.S. persons/companies are prohibited from interacting with it.

• They also target entire entities (companies, financial facilitators, etc.) that channel funds (including via crypto) for or on behalf of bad actors.

• Non-U.S. persons/companies can also get in trouble if they facilitate or conspire in transactions that help someone evade sanctioned status. It’s not just about being physically in the U.S.

Bottom line: it’s not enough to assume crypto is “anonymous” or “borderless” in the sense that sanctions can be ignored. With blockchain tracing, front companies, and legal enforcement, even complex evasion networks can (and are) being disrupted.

The Chainalysis / OFAC Story: Iranian Shadow Crypto Banking Network

A recent example shows how this works in practice. Chainalysis reported on sanctions by OFAC in September 2025 targeting a big “shadow banking” network helping Iran evade sanctions using crypto. Key highlights:

1. Who was involved

   
   

   Two Iranian nationals, Alireza Derakhshan and Arash Estaki Alivand, plus a network of front companies based in Hong Kong and the UAE.

   
   

2. What they did

   
   

   • They coordinated purchases of over $100 million in cryptocurrency tied to Iranian oil sales (2023-2025) that benefited Iran’s military entities (IRGC-QF and MODAFL).

   • Their network’s wallets had inflows of over $600 million in total, once you include all the front companies etc.

   • They used typical evasion tricks: front companies to mask who’s really controlling funds, movement across multiple jurisdictions, mixing traditional banking / shadow banking with cryptocurrency.

   
   

3. What OFAC did

   
   

   • Designated the individuals and front companies, meaning their U.S.-exposed assets are blocked, and U.S. persons or businesses are forbidden from dealing with them.

   • Called out that these shadow banking networks are a growing threat, especially when combined with crypto’s potential to obscure flows.

Why This Matters for You

If you’re in the crypto space, whether as a trader, developer, or investor, here are some reasons this isn’t just “government stuff”:

• Even indirectly interacting with sanctioned wallets or entities can expose you to legal, financial, or reputational risk.

• Auditing and compliance (wallet screening, counterparty checks) are becoming more common. Exchanges, service providers, or even individual users may need to be more careful.

• Because blockchain transactions are transparent (to some degree), enforcement agencies are getting better at tracing bad activity. “Obscurity” is no longer sufficient for safety.

• Platforms pretending to be “decentralised” or “anonymous” may still have vulnerabilities if they interact with regulated entities, or if they carry out operations in jurisdictions where sanctions law applies.

Common Questions & Misconceptions

Is Crypto completely anonymous?

No. Blockchain gives visibility. Even with privacy tools, if law enforcement or sanctions agencies find the links, they can designate them.

Can non-US citizens be punished under OFAC rules?

Yes. If they facilitate or conspire in sanctions evasion, or if their actions affect U.S. jurisdiction, they can be exposed

Are all sanctions the same?

No. Some sanctions programs are narrow (specific individuals/entities), others very broad (entire countries/sectors). The type of activity, government policy, and legal authority matter.

What if I accidentally send crypto to a sanctioned address?

It can be messy. You may need to report it. Depending on circumstances, there may be legal or regulatory consequences.

Trends

• Increasing use of blockchain analysis by governments to map out evasion networks.

• More sanctions designations including crypto addresses & wallets.

• Stronger regulation of exchanges, mixers, bridges, cross-chain tools etc. with respect to sanctions compliance.

• Risk that even platforms in “safe” jurisdictions may get affected indirectly (via counterparties, service providers etc.)

Sanctions are one of the tools governments use to enforce foreign policy, protect national security, and counter illicit activity. With crypto’s increasing involvement in global finance, understanding sanctions is no longer optional.

If you’re unsure whether a platform is legit, or worried that some crypto you own might accidentally be tied up in sanction issues, Crypto Seeker has your back.

Reach out if you need help evaluating a project, recovering lost crypto, or just staying on the right side of the law.