U.S. sanctions compliance guidance for virtual currency industry

Brochure as a resource to help the virtual currency industry navigate and comply with OFAC sanctions

Resource to help the virtual currency industry navigate and comply with OFAC sanctions

The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) today released sanctions compliance guidance for the virtual currency industry.

The brochure [PDF 2.1 MB]—a resource to help the virtual currency industry navigate and comply with OFAC sanctions—provides an overview of OFAC sanctions requirements and procedures, including licensing and enforcement processes, and highlights sanctions compliance best practices tailored for the virtual currency industry.

Read a related OFAC release.

In addition, OFAC updated a set of “frequently asked questions” (FAQs) (full text below).
 

559. For purposes of OFAC sanctions programs, what do the terms "digital currency," "digital currency wallet," "digital currency address," and "virtual currency" mean?

Digital currency includes sovereign cryptocurrency, virtual currency (non-fiat), and a digital representation of fiat currency.

A digital currency wallet is a software application (or other mechanism) that provides a means for holding, storing, and transferring digital currency. A wallet holds the user's digital currency addresses, which allow the user to receive digital currency, and private keys, which allow the user to transfer digital currency. The wallet also maintains the user’s digital currency balance. A wallet provider is a person (individual or entity) that provides the software to create and manage wallets, which users can download. A hosted wallet provider is a business that creates and stores a digital currency wallet on behalf of a customer. Most hosted wallets also offer exchange and payments services to facilitate participation in a digital currency system by users.

A digital currency address is an alphanumeric identifier that represents a potential destination for a digital currency transfer. A digital currency address is associated with a digital currency wallet.

Virtual currency is a digital representation of value that functions as (i) a medium of exchange; (ii) a unit of account; and/or (iii) a store of value; and is neither issued nor guaranteed by any jurisdiction.

October 15, 2021

 

646. How do I block digital currency?

Once a U.S. person determines that they hold virtual currency that is required to be blocked pursuant to OFAC's regulations, the U.S. person must deny all parties access to that virtual currency, ensure that they comply with OFAC regulations related to the holding and reporting of blocked assets, and implement controls that align with a risk-based approach. (See 31 C.F.R. 501.603 for reporting requirements related to blocked and unblocked property.)

For example, a U.S. virtual currency company that maintains multiple virtual currency wallets in which a blocked person has an interest may choose to block each virtual currency wallet or opt to consolidate wallets that contain blocked virtual currency (similar to an omnibus account). Each of these solutions is consistent with OFAC requirements for holding blocked property, so long as there are controls that will allow the virtual currency to be unblocked and returned to its owner only pursuant to an OFAC authorization or when the legal prohibition requiring the blocking of the virtual currency ceases to apply. For those with questions about blocking funds related to traditional funds transfers, see FAQ 32.

U.S. persons are not obligated to convert the blocked virtual currency into traditional fiat currency (e.g., U.S. dollars), and are not required to hold such blocked property in an interest-bearing account. Blocked virtual currency must be reported to OFAC within 10 business days, and thereafter on an annual basis, so long as the virtual currency remains blocked.  Questions about whether a transaction should be blocked may be directed to OFAC at 202-622-2490 or OFAC_Feedback@treasury.gov. Owners of blocked virtual currency may also contact OFAC regarding the treatment of their virtual currency pursuant to this guidance.

October 15, 2021


For more information on this topic or to learn more about KPMG’s Trade & Customs Services, contact:

Doug Zuvich
Partner and Global Practice Leader
T: 312-665-1022
E: dzuvich@kpmg.com

John L. McLoughlin
Principal and East Coast Leader
T: 267-256-2614
E: jlmcloughlin@kpmg.com

Andy Siciliano
Partner and National Practice Leader
T: 631-425-6057
E: asiciliano@kpmg.com

Steve Brotherton
Principal and Global Export and Sanctions Leader
T: 415-963-7861
E: sbrotherton@kpmg.com

Luis (Lou) Abad
Principal, Washington National Tax
T: 212-954-3094
E: labad@kpmg.com

Irina Vaysfeld
Principal
T: 212-872-2973
E: ivaysfeld@kpmg.com

Amie Ahanchian
Principal
T: 202-533-3247
E: aahanchian@kpmg.com

Christopher Young
Principal
T: 312-665-3229
E: christopheryoung@kpmg.com

Gisele Belotto
Principal
T: 305-913-2779
E: gbelotto@kpmg.com

George Zaharatos
Principal
T: 404-222-3292
E: gzaharatos@kpmg.com

Andy Doornaert
Managing Director
T: 313-230-3080
E: adoornaert@kpmg.com

Jessica Libby
Principal
T: 612-305-5533
E: jlibby@kpmg.com

 

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