Hamid Ghanbari – International Law Expert
This perception stems from the inherent features of cryptocurrency: peer-to-peer transfer, independence from banks and financial intermediaries, and global coverage. But behind this initial appeal, more profound questions lie hidden: Can cryptocurrencies truly be a suitable alternative to traditional money transfer tools? Is their use to counter sanctions possible without legal and security consequences? And ultimately, are these technologies a threat to the global legal order, or can they be contained within its framework?

Cryptocurrencies were fundamentally designed to liberate the financial system from the dominance of central institutions. Bitcoin, the world’s first cryptocurrency, was born amid the 2008 financial crisis with the slogan “bank without bankers.” Consequently, many technical features of these currencies were designed to ensure resistance to censorship, uncontrollability by governments, and independence from the global banking system—features that could assist sanctioned economic actors under sanction conditions.

The first important feature of cryptocurrencies is peer-to-peer (P2P) transfer. In this structure, no bank, financial institution, or central clearinghouse exists between the two transacting parties. All that is needed is for both the sender and receiver to have a cryptocurrency wallet; then, for a very minimal fee, they can transfer the desired amount to any point in the world within minutes, without needing SWIFT, an intermediary bank, or a fiat currency. This very feature holds unparalleled appeal for circumventing the US-dominated financial network.

The second feature is the pseudo-anonymity of transactions. Although in networks like Bitcoin or Ethereum, all transactions are recorded publicly, this record contains only wallet addresses (a string of letters and numbers) instead of names and personal details. As a result, as long as no link is established between these addresses and real identities, identifying individuals is difficult. This is a significant advantage for governments or individuals suffering from sanctions or wishing to leave no trace in the banking system.

The third feature is the existence of platforms without centralized oversight. Decentralized exchanges (DEX) are structures based on smart contracts where there is no executive entity for customer verification or account blocking. In these spaces, users can exchange assets simply by connecting their wallets to a user interface, without anyone questioning where they came from or where they are going. This lack of identity transparency provides an opportunity for free activity from the perspective of sanctioned actors.

In addition to these, stablecoins (dollar-backed cryptocurrencies) must not be overlooked. Currencies like USDT (Tether) or USDC allow users to maintain the value of their assets tied to the US dollar without needing to enter the traditional banking system. This capability is particularly important for importers, exporters, or contractors who require price stability. In fact, stablecoins are a form of digital dollar that often plays the role of a substitute for traditional dollar remittances.

Overall, the combination of these features—direct transfer, anonymity, lack of centralized oversight, and access to stable currency—has turned cryptocurrencies into a potential tool for circumventing sanctions; a tool that requires neither authorization from the US Treasury, European banks, nor the SWIFT system. But is the matter this simple?

Despite cryptocurrencies seemingly creating a borderless and uncontrolled environment for money transfer, experiences in recent years have shown that this technology also has its own limitations and vulnerabilities—especially when US sanctions and international regulatory systems are involved. The first and most crucial vulnerability is the inherent transparency of the blockchain. Contrary to public perception, networks like Bitcoin and Ethereum are entirely transparent. All transactions, from the first to the last, are publicly and permanently recorded and viewable. This very feature allows sanctioning and security entities to analyze and identify user behavior patterns, transaction paths, and potential connections.

The US government, with the help of blockchain analytics companies like Chainalysis and Elliptic, has been able to attribute even wallets with no identity information to sanctioned groups, including Hamas, ISIS, or North Korea-affiliated hackers. This attribution is sometimes done through network analysis of transactions, or by examining metadata like IP addresses, transaction times, or interactions with exchanges that store KYC data. Through this method, wallets belonging to the Al-Qassam Brigades were blocked and placed on the SDN list in 2021.

Moreover, cryptocurrencies are not always exchanged in virtual space. Many transactions require entry and exit into the real world, where cryptocurrency must be converted into goods, services, or fiat currency. This is precisely where sanctioning entities exercise the most control. In today’s world, most major international exchanges—including Binance, Coinbase, Kraken, and OKX—operate under strict AML/KYC regulations to maintain access to US and European markets. Many of them, voluntarily or mandatorily, block transactions related to Iran, Syria, Russia, North Korea, and Venezuela. Even if these exchanges have no offices or employees in the US, merely providing services to Iranian users may expose them to secondary sanctions—a matter clearly seen in the cases of the Batata and even Kraken exchanges.

Even platforms that appear decentralized and anonymous—like Tornado Cash or Uniswap—have not escaped this oversight. In the Tornado Cash case, the US government placed not only wallets associated with this platform but also its smart contract itself on the sanctions list. The reason for this action was the use of the platform by the Lazarus Group (affiliated with North Korea) to hide the origin of hundreds of millions of dollars in stolen assets. This move demonstrated that even immutable code on the blockchain can become a target of sanctions measures. Under such conditions, users interacting with this code may also come under suspicion.

On the other hand, in many countries, providing cryptocurrency services without complying with anti-money laundering regulations incurs criminal liability. In the US, a developer who writes code and is aware of its criminal use but takes no action to prevent it can be charged with complicity in a crime. This reasoning formed the basis for prosecuting developers in the Helix and Tornado Cash cases. The concept of “willful blindness” plays a key role here: If you could have known, but chose not to, you are an accomplice.

Another critical point is the widespread use of extraterritorial powers by sanctioning entities. Under the US sanctions regime, it does not matter where the violating company or individual is based; if they interact with a sanctioned entity or individual—even without any connection to the US—they may become subject to secondary sanctions. This means that even cryptocurrency platforms outside the US are at risk if they do not implement necessary controls. Many of them have adopted strict policies to escape this danger, sometimes blocking user accounts or seizing assets without warning.

In such an environment, maintaining user anonymity is no longer as simple as before. Although tools like VPNs, mixers, or decentralized exchanges are still used, each is also at risk. Analysis of wallet behaviors, transactional connections, repeated use of suspicious addresses, and international data-sharing collaborations have led to the +identification and prosecution of even nameless users.

Finally, a fundamental point must be noted: Using cryptocurrency to circumvent sanctions is not only dangerous but, in the absence of technical and legal awareness, can itself become a source of harm. The common perception of cryptocurrency anonymity and freedom, if devoid of an understanding of the complexities of the technology and sanctions regime, not only offers no benefit but may lead to asset seizures, wallet sanctions, and even criminal or administrative prosecution. What initially appears as an opportunity may, in practice, become a trap.