Bitcoin Flows from Sanctioned Sources

Abstract

Cryptocurrencies’ pseudonymity property poses regulatory challenges and has attracted illicit actors that try to avoid oversight. To counter this, the U.S. Treasury’s Office of Foreign Assets Control (OFAC) sanctions individuals and entities using Bitcoin for cybercrime, terrorism financing, and other illicit activities. However, the effectiveness of these measures remains uncertain. This study analyzes over 13 million Bitcoin transactions linked to sanctioned entities, tracing fund flows and exchange interactions. We find that ~175,000 BTC was moved before sanctions took effect, with only 50 BTC remaining post-sanction, indicating preemptive fund displacement. Cybercrime-linked addresses accounted for the largest transfers—sometimes exceeding $1 billion—while sanctioned entities favored large, direct transactions to exchanges. Despite activity dropping immediately after sanctions took effect, some entities continued transacting for up to 1,500 days, exposing enforcement gaps. Our findings highlight key challenges in sanction enforcement, including delayed restrictions, exchange compliance gaps, and strategic fund movements. These insights inform policymakers and regulators seeking to strengthen cryptocurrency financial controls.