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.
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."
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.
Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.