Chainalysis explore how crypto sanctions in 2024 are reshaping global finance, especially in sanctioned nations like Russia and Iran.
After the release of its Scams chapter, Chanalysis’ Sanctions chapter of Chainalysis’ 2025 Crypto Crime Report shows that geopolitical tensions in 2024 drove a significant escalation in crypto-related sanctions, with the U.S. Treasury’s Office of Foreign Assets Control (OFAC) at the forefront of enforcement efforts.
There is also a strategic shift in how sanctions are now applied, with authorities moving beyond targeting individuals and instead focusing on dismantling the financial infrastructure that facilitates illicit activity.
Sanctioned jurisdictions and entities received approximately $15.8 billion in cryptocurrency throughout the year which accounted for around 39% of all illicit crypto transactions, with Iran being a major recipient of these funds.
Sanctions Enforcement Actions Against Illicit Crypto Activities
Regulatory authorities intensified enforcement actions in 2024, particularly targeting crypto operations linked to Russia. With ongoing global conflicts and concerns over cybercrime, law enforcement agencies across multiple jurisdictions cracked down on Russian-affiliated platforms that facilitated sanctions evasion.
One of the key enforcement actions of the year was the sanctioning of KB Vostok OOO, a Russian UAV developer, for supplying drones to Russian forces. This highlighted how cryptocurrency is increasingly intertwined with state-sponsored military operations.
Meanwhile, Operation Final Exchange, led by Germany’s Federal Criminal Police (BKA), resulted in the seizure of 47 Russian-language no-KYC crypto exchanges, which were being used to facilitate illicit financial activities, including ransomware payments and darknet transactions.
OFAC also sanctioned Cryptex, a Russia-based crypto exchange, for its role in laundering funds linked to cybercrime, further tightening restrictions on platforms suspected of aiding illegal financial networks.
In the UK, the National Crime Agency (NCA) launched Operation Destabilise, which successfully dismantled a multi-billion-dollar Russian-speaking money laundering network. This operation exposed the scale at which illicit funds were being processed through Russian-affiliated exchanges. However, despite these enforcement actions, the ecosystem of Russian-language no-KYC exchanges proved resilient.
Many platforms that were shut down quickly rebranded and resurfaced under different names, making it difficult to completely eliminate their presence. The rapid emergence of new no-KYC exchanges underscores the challenges regulators face in permanently disrupting illicit crypto activity.
Crypto as a Financial Tool in Sanctioned Nations
As traditional banking systems impose stricter sanctions, countries under economic restrictions have increasingly turned to cryptocurrency as a means of sustaining trade and securing capital flows. Russia and Iran, two of the most heavily sanctioned nations, have been at the forefront of this shift, forging new financial relationships to bypass U.S.-led sanctions. Strengthening ties with BRICS nations, these countries have been working on alternative payment systems that circumvent reliance on the U.S. dollar, seeking greater financial independence.
Russia has gone a step further by legalising cryptocurrency mining and international crypto payments, marking a strategic embrace of digital assets as a tool for economic survival. By integrating cryptocurrency into its financial system, Russia aims to ensure that it remains connected to global trade despite mounting restrictions.
Beyond state-level adoption, individuals living in sanctioned regions have also increasingly relied on cryptocurrency to navigate economic instability. For many, digital assets serve as a lifeline for wealth preservation and cross-border transactions, providing an escape route from restrictive financial policies.
With access to the traditional banking system becoming more difficult, cryptocurrencies like Bitcoin and stablecoins offer an alternative means of securing and transferring wealth, particularly in countries experiencing hyperinflation or government-imposed capital controls.
Challenges in Enforcing Sanctions on Decentralised Platforms
While enforcement agencies have had some success in targeting centralised exchanges, the decentralised nature of many blockchain-based platforms presents significant challenges. Unlike traditional financial systems, decentralised finance (DeFi) protocols operate without intermediaries, making it difficult for regulators to enforce compliance or impose restrictions.
One of the most notable examples of this challenge is Tornado Cash, a decentralised mixing service that has continued to process illicit transactions despite being sanctioned. In 2024, inflows to Tornado Cash surged by 108%, largely due to an increase in stolen funds being laundered through the platform. This surge highlighted the limitations of existing regulatory frameworks in curbing illicit activities within DeFi.
Adding to the complexity, a U.S. court ruling questioned whether OFAC has the legal authority to sanction Tornado Cash’s smart contract addresses, raising fundamental concerns about the enforceability of sanctions in a decentralised environment.
To effectively combat illicit finance within DeFi, enforcement agencies will require international cooperation and proactive compliance measures at both the protocol and service levels. The development of blockchain-based compliance tools and collaboration with decentralised platforms will be essential in striking a balance between financial privacy and regulatory oversight. Without these measures, DeFi could continue to serve as a safe haven for illicit transactions.
Geopolitical Instability and the Future of Crypto Sanctions
Ongoing geopolitical instability has further fueled the use of cryptocurrency in sanctioned regions, particularly in Iran. Amid economic hardship and growing distrust in the government, Iranian citizens have increasingly turned to digital assets to safeguard their wealth. This trend was particularly evident during periods of heightened political tension, when outflows from Iranian crypto exchanges surged, indicating a rush to move assets beyond the reach of state controls.
Bitcoin, with its censorship-resistant properties, has emerged as a particularly attractive option for those looking to escape financial repression. However, regulatory compliance efforts are beginning to limit some of these capital flight opportunities. Leading cryptocurrency exchanges have been implementing stricter compliance programs, reducing exposure to sanctioned entities and making it more difficult for individuals in restricted regions to access global crypto markets.
At the same time, blockchain intelligence firms are playing an increasingly crucial role in tracking illicit financial flows. Through on-chain analytics and forensic tools, these firms are working to identify and mitigate risks associated with sanctioned jurisdictions. Moving forward, collaboration between industry participants, regulators, and public-private partnerships will be critical in maintaining effective sanctions enforcement.
As digital assets continue to disrupt traditional financial systems, regulatory frameworks will need to evolve to keep pace with the rapidly changing landscape. The ongoing battle between financial sovereignty and regulatory oversight is set to shape the future of cryptocurrency.
Read the full report here.
