OFAC considers blacklisting certain crypto addresses

The Office of Foreign Asset Control (OFAC) has announced it may add to its ‘Forbidden’ list cryptocurrency addresses that are associated with individuals and groups that US companies and citizens are barred from doing business with – opening a minefield of complexity and questions.

Crypto can be used for illegal purposes like money laundering and tax evasion, as a growing proportion of the criminal fraternity is learning. And so it’s fair enough that the authorities would try to prevent that from happening; it’s their job, after all.

Now, OFAC has announced its clever idea of adding crypto addresses to its list of organisations US citizens aren’t allowed to do business with. As it said in a new section of its website, it ‘may add digital currency addresses to the SDN List to alert the public of specific digital currency identifiers associated with a blocked person.’

That’s nice in theory. In practice, it opens up a large can of worms, including but not limited to the following questions:

What happens if you receive funds from an address on the list? Sending small amounts of currency to lots of ordinary addresses would be a great way for a criminal to cause huge disruption and mask ‘real’ transactions to their associates. What if funds from a flagged account end up back in general circulation? At what point are they considered ‘clean’? What if funds are sent to an exchange? Are all users considered tainted by association? What if criminals get smarter and start using one-time addresses for their transactions (as Satoshi’s white paper recommends)? What about mixers? What about change from a transaction sent to a criminal – is this considered tainted too? What about miners and nodes that propagate a criminal transaction? Who will be made to enforce the blacklist?

It doesn’t stop there, but it’s clear that the devil is in the detail – and it’s not going to be easy to implement.

Read more at https://www.coindesk.com/goodbye-fungibility-ofacs-bitcoin-blacklist-remake-crypto/

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