US Treasury Official Warns Crypto Industry to Proactively Sanction 'Problematic' Wallets

FinCEN Associate Director Alessio Evangelista said crypto service providers shouldn't wait for the government to designate a wallet if it's being used for illicit activity.

AccessTimeIconMay 19, 2022 at 4:37 p.m. UTC
Updated May 11, 2023 at 4:40 p.m. UTC

A high-ranking U.S. financial crimes enforcement officer on Thursday directed the crypto industry to proactively blacklist “problematic” wallets even before Treasury Dept. officials order them to do so.

Alessio Evangelista, the associate director for Enforcement at the Financial Crimes Enforcement Network (FinCEN), said that “too often” crypto service providers have opted to keep their heads in the sand about blatantly suspect wallets “right up until the day of an OFAC designation or criminal indictment.”

Speaking before an audience of compliance wonks at the Chainalysis LINKS conference, Evangelista warned that virtual asset service providers are “putting their own reputation at risk” by ignoring “clearly observable red flags that they could and arguably should have taken note of long ago.”

The comments highlight federal officials’ growing concerns over crypto crime, a multibillion-dollar backwater that in some cases now threatens national security. This month, Treasury officers for the first time sanctioned a crypto mixer – an on-chain privacy tool that crypto holders use to hide their tracks – over processing assets stolen by North Korean hackers in the $620 million Axie Infinity heist.

“These funds were stolen to support a totalitarian regime that spends its money on developing weapons of mass destruction at the expense of feeding its citizens,” Evangelista said. He said virtual asset service providers have an obligation to effectively police themselves.

He also called out crypto projects for which “decentralization” was more buzzword than reality. Crypto entities that operate under the direction of individuals cannot skirt around their compliance obligations by falsely calling themselves decentralized, he said.

North Korean hackers have used multiple crypto mixers to launder funds stolen from Axie, including Blender, the first mixer to be sanctioned, and Tornado Cash. A Tornado Cash representative previously told CoinDesk that “OFAC is the judge of what addresses need to be banned."


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Danny is CoinDesk's Managing Editor for Data & Tokens. He owns BTC, ETH and SOL.

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