This article is part of our Regulatory Outlook 2026 Seriesin which we explore the key regulatory and policy trends that we believe will impact cryptoassets in 2026.
In recent years, countries like Iran, North Korea, Russia and Venezuela have used cryptoassets to evade sanctions and bypass the banking sector.
Sanctions agencies, including the US Treasury’s Office of Foreign Assets Control (OFAC), the European Commission, and the UK’s Office of Financial Sanctions Implementation (OFSI), now regularly sanction crypto-asset participants, frequently publishing wallet addresses on blacklists.
For compliance teams at exchanges and financial institutions, sanctions compliance has become a top priority, with monitoring of wallets and blockchain transactions essential to determining exposure.
We believe that in 2026, policymakers and regulators will focus with renewed urgency on preventing crypto-asset sanctions evasion. Compliance teams should expect higher standards and prepare proactively.
Persistent threats and new challenges
Several ongoing global risks make it likely that sanctions authorities will prioritize crypto-related threats in 2026:
- Recent US efforts intervention in Venezuelathe instability of the regime in Iran and Russia’s ongoing military campaign in Ukraine all have implications for the crypto-asset sector. Every country is already using cryptoassets to evade sanctions and will likely continue to do so.
- North Korea continues to acquire billions of dollars in cryptoassets through cybercrime by 2025. set a record year for its profits from stealing crypto-assets.
- Cryptoassets are playing a growing role in the global narcotics trade, prompting U.S. policymakers to crack down on the use of cryptoassets by drug traffickers.
Those who escape sanctions have also adapted to technological innovations that challenge the effectiveness of existing regimes. For example, stablecoins have become the preferred crypto-asset to circumvent sanctions.
While blockchain analytics can identify fund flows involving blacklisted actors and stablecoin issuers can freeze sanctioned wallets, Elliptic’s research shows that sanctioned actors are using stablecoins on an ever-larger scale, primarily dollar-pegged USDT. Elliptic identified wallets controlled by the Central Bank of Iran holding more than $500 million in USD to circumvent US banking restrictions and support the weakening of the rial.
Stablecoins offer several attractive features for sanctioned players. Price stability and pseudonymous cross-border transfers make them valuable to entities excluded from the banking sector. And because stablecoins are typically pegged to the U.S. dollar, sanctioned actors can settle transactions in dollar-valued commodities, like oil or dual-use technologies, without going through U.S. correspondent banks.
This poses a significant challenge for sanctions enforcement, which has relied for two decades on the correspondent banking system to isolate countries like Iran, North Korea and Russia. Authorities have had success disrupting the use of stablecoins by sanctioned players, such as the early 2025 withdrawal of the sanctioned Russian exchange Garantex, which led Tether to freeze approximately $27 million in USDT.
However, sanctioned actors are adapting. In January 2025, Russian entities launched a ruble-backed stablecoin, A7A5, which, according to Elliptic analysis, has now facilitated over $100 billion in transactions. A7A5 allows sanctioned Russian entities to conduct on-chain transactions without touching the global banking system, reducing the risk of funds being frozen. As US, EU and UK sanctions begin to restrict A7A5 users’ ability to convert to fiat currency, the stablecoin demonstrates how quickly sanctioned players can launch alternatives.
Sanctioned actors are also increasingly using cross-chain services to hide assets. Elliptic’s research shows that North Korea regularly launders cybercrime proceeds through cross-chain bridges, decentralized exchanges, and coin swap services, exchanging funds between blockchains and assets. This requires holistic blockchain monitoring, capable of tracing cross-chain flows.
Given this evolving landscape, policymakers see circumventing crypto-related sanctions as requiring urgent action.
Sanctions authorities will be busy in 2026
In 2026, we expect sanctions agencies, including OFAC, OFSI, and the European Commission, to continue to aggressively blacklist crypto addresses and impose restrictions on crypto-asset entities. We anticipate that regulators will tighten their expectations and scrutiny over how exchanges, financial institutions and other industry participants comply with these measures.
First, we expect regulators to issue more specific sanctions compliance guidance for the crypto-asset sector. While this may clarify expectations, the new guidance also creates additional requirements that add operational complexity.
For example, last year OFSI published a cryptoasset threat assessment stating that companies should identify exposure to indirect sanctions at a minimum of three to five hops. This clarifies OFSI’s expectations but requires companies to adjust their blockchain filtering solutions to detect indirect risks without generating excessive false positives. Compliance teams should expect additional guidance in 2026 to require similar benchmarking work.
We also expect regulators to take a closer look at how compliance teams use blockchain monitoring in practice. This may include examining:
Companies that do not meet these expectations are exposed to coercive measures. We expect that in 2026, one or more sanctions enforcement actions will be taken against crypto-asset companies, with authorities showing zero tolerance for non-compliance involving major security risks like Russia and North Korea.
Proactive compliance will pay off
With increased scrutiny coming, crypto-asset exchanges and financial institutions must effectively use blockchain analytics to identify sanctions-related activities. Compliance teams should test the robustness of their screening solutions, adjust settings based on their specific risks and regulatory expectations, and stay equipped to identify emerging threats such as stablecoin and cross-chain sanctions evasion.
Teams that prioritize proactive sanctions compliance will be best positioned to earn the trust of regulators and set their business up for success.
