When you send Bitcoin or Ethereum, you might think it’s just a digital transfer between wallets. But behind the scenes, governments are watching every transaction-especially if it touches a sanctioned address. As of 2025, the U.S. Treasury’s Office of Foreign Assets Control (OFAC) has added over 1,200 cryptocurrency wallet addresses to its sanctions list. These aren’t random numbers. They’re linked to hackers, terrorists, drug cartels, and state-sponsored cybercriminals trying to hide money in crypto.

What Is the OFAC Sanctions List?

OFAC is part of the U.S. Department of the Treasury. Its job? Block financial access to people and groups that threaten U.S. national security. For decades, it targeted banks, shell companies, and individuals. But since 2018, it’s been adding crypto wallets to its Specially Designated Nationals (SDN) list. Now, if you send money to one of these addresses, you could be breaking U.S. law-even if you didn’t know it was blocked.

The list doesn’t just include Bitcoin. It covers 17 different cryptocurrencies, including Ethereum (ETH), USDT, USDC, Monero (XMR), ZCash, and even newer chains like Arbitrum and Binance Smart Chain. That’s because bad actors don’t stick to one coin. They jump between them to avoid detection.

How OFAC Tracks Crypto Addresses

Unlike banks, crypto doesn’t have a central registry. Wallets are pseudonymous. But blockchain ledgers are public. Every transaction is recorded forever. That’s why OFAC works with firms like Chainalysis and Scorechain to trace money flows.

Here’s how it works: When a wallet gets flagged, analysts look at its history. Who sent money to it? Where did it send money next? If a wallet received funds from a known ransomware group, and then sent them to a crypto exchange, that’s a red flag. OFAC adds that wallet to the list. Exchanges then freeze any future deposits or withdrawals tied to it.

In May 2025, OFAC launched its Blacklist v2.0. This version includes real-time alerts and now monitors Layer 2 networks like Polygon and Arbitrum-places where users thought they could slip under the radar. The system updates every 15 minutes. Major exchanges like Coinbase and Kraken sync with these updates automatically. If you try to send USDT to a sanctioned address, your transaction gets blocked before it even leaves your wallet.

Who’s on the List?

The names on the list aren’t always obvious. Some are individuals. Others are groups or even AI systems.

In September 2025, two Iranian nationals, Alireza Derakhshan and Arash Estaki Alivand, were added. Their wallets received over $600 million from oil sales. They used Ethereum and TRON to move money out of Iran. One wallet alone had 14,000 incoming transactions.

Then there’s SECONDEYE SOLUTION, linked to the Internet Research Agency LLC-the Russian group accused of interfering in U.S. elections. OFAC blocked three Bitcoin addresses tied to them, including 1NE2NiGhhbkFPSEyNWwj7hKGhGDedBtSrQ and 19D8PHBjZH29uS1uPZ4m3sVyqqfF8UFG9o.

And in February 2025, OFAC did something unprecedented: it sanctioned an AI-powered trading bot. This bot, used by a sanctioned entity, automatically moved $60 million through DeFi protocols. It wasn’t a person. It was code. And now, that code is illegal to interact with under U.S. law.

Why Stablecoins Are a Big Target

You might think privacy coins like Monero are the main concern. But in reality, stablecoins like USDT and USDC are the workhorses of sanctions evasion.

Why? Because they’re pegged to the U.S. dollar. They’re stable. They’re widely accepted. And they’re easier to move across borders than Bitcoin.

In March 2025, Tether froze $450 million in USDT linked to Iranian entities. That’s not a typo. Half a billion dollars-blocked in one move. Tether, the company behind USDT, now has a compliance team larger than most crypto exchanges. They scan every transaction against OFAC’s list. If it matches, the funds are frozen. No appeal. No refund.

Even if you’re not trying to break the law, if you hold USDT in a wallet that once received funds from a sanctioned address, your entire balance could be flagged. That’s why exchanges now screen not just your current wallet, but your entire transaction history.

What Happens When You Send Money to a Sanctioned Address?

Let’s say you send $5,000 in ETH to a wallet you found on a forum. You didn’t know it was blocked. What happens next?

First, the exchange you’re using will likely block the transaction. You’ll see an error: “Transaction declined due to sanctions compliance.”

If the transaction goes through-maybe you used a non-compliant exchange-your wallet could get flagged. Future transactions from that wallet will be frozen. You might be asked to prove you didn’t know the address was sanctioned. Good luck with that. OFAC doesn’t care about intent. If your wallet touches a sanctioned one, you’re in violation.

In March 2025, the exchange Garantex was shut down after moving $26 million in funds tied to sanctioned entities. Its owners were indicted. Its successor, Grinex, got added to the list within 48 hours. That’s how fast enforcement moves now.

DeFi and Smart Contracts: The New Frontier

Decentralized finance (DeFi) was supposed to be beyond government control. But OFAC is changing that.

In April 2025, OFAC and the Financial Action Task Force (FATF) issued a joint directive. It says DeFi protocols must implement sanctions screening. If a smart contract allows users to swap ETH for USDT and one of the parties is sanctioned, the protocol is now liable.

And it’s getting worse. In May 2025, proposed regulations would make smart contract developers personally liable if their code enables sanctions evasion. That means if you write a DeFi app and someone uses it to launder money, you could be arrested.

The Lazarus Group, a North Korean hacking team, stole $200 million in Q1 2025 by routing funds through DeFi protocols. They didn’t use exchanges. They used automated liquidity pools. OFAC responded by adding 12 DeFi contracts to the SDN list.

How to Stay Compliant

If you’re a regular user, you don’t need to do much. Most exchanges handle it for you. But if you’re running a business, running a node, or managing crypto funds, you need to act.

Here’s what you need to do:

1. Use only regulated exchanges that show OFAC compliance on their website.
2. Never reuse old wallet addresses. Create a new one for each transaction.
3. Use blockchain explorers like Etherscan or Blockchain.com to check any address before sending funds.
4. If you’re a business, integrate OFAC’s XML feed into your system. Tools like Elliptic or CipherTrace can automate this.
5. Train your team. Sanctions aren’t optional. Violations can mean fines up to $20 million per incident.

There’s no grace period. No warning. One bad transaction can shut down your business.

The Bigger Picture

OFAC’s crypto sanctions aren’t just about stopping criminals. They’re about controlling the future of money.

As more people use crypto for cross-border payments, governments are racing to keep control. The U.S. doesn’t want to lose its financial dominance. So it’s turning blockchain-a tool meant to remove intermediaries-into a surveillance system.

It’s working. In 2024, joint raids by U.S., German, and Finnish authorities shut down six crypto infrastructure hubs linked to sanctions evasion. In 2025, the U.S. State Department offered up to $5 million for information leading to the arrest of Garantex executives.

The message is clear: Crypto isn’t lawless. It’s not anonymous. And if you’re using it, you’re under watch.

What’s Next?

Experts predict OFAC will keep expanding. Privacy coins like Monero and ZCash are next. NFTs might be added soon. And if AI trading bots are sanctioned, what about AI-generated wallets? Or decentralized identity systems?

The line between innovation and enforcement is blurring. What was once seen as a tool for freedom is now a tool for control. And the rules are changing faster than anyone can keep up.

If you’re in crypto, you need to assume every transaction is monitored. Every wallet is traceable. And every address has a history you can’t erase.