Regulatory News: The U.S. Commodity Futures Trading Commission and the Office of Foreign Assets Control have successively issued cryptocurrency regulatory guidelines.

The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) and the Office of the Comptroller of the Currency (OCC) have successively issued cryptocurrency regulatory policies. OFAC's main focus is to restrict cryptocurrency transactions related to U.S. sanctioned entities; while OCC has included cryptocurrencies in its annual bank supervision and operational plan for the first time.

Restrictions on U.S. Sanctioned Persons

The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) released a policy guidance on 10/15 regarding the virtual currency industry's approach to U.S. sanctioned persons. The guidance highlighted the increasing role of virtual currencies in the global economy and the growing prevalence of payment systems, which pose risks to U.S. sanction policies. Entities that may be involved include:

• FinTech institutions
• Wallet service providers
• Traders
• Miners
• Users

The document emphasized the importance for virtual currency industry participants to restrict the flow of funds to U.S. sanctioned individuals. The guidance aims to assist industry members in reducing risks, and it is the responsibility of industry members to ensure they do not engage in transactions, directly or indirectly, with U.S. sanctioned entities, including the exchange of fiat currency and virtual currency.

Additionally, OFAC mentioned the use of Virtual Private Networks (VPNs) by users in restricted regions within the cryptocurrency space. OFAC stressed that entities must have analytical tools to identify VPNs to detect and prevent logins from IP addresses originating from sanctioned jurisdictions.

By filtering known user IP addresses to detect unlikely login scenarios, such as a user initially logging in from a U.S. IP address and later from a Japanese IP address, risks can be mitigated.

OFAC stated that enforcement actions have been taken against exchanges that failed to prevent users from sanctioned jurisdictions from using their platforms.

Cryptocurrency Included in OCC's Priority Supervisory Issues

The Office of the Comptroller of the Currency (OCC) also released its 2022 Bank Supervision Operating Plan on the same day, 10/15, with cryptocurrency being listed for the first time as one of the 11 priority supervisory issues for the fiscal year, including:

• Bank risks
• Cybersecurity
• Credit risks
• Loan and credit loss provisions
• Climate change
• Third-party risks
• Bank secrecy laws, consumer compliance, and lending fairness
• Interest rate risks
• London Interbank Offered Rate (LIBOR)
• Payments
• FinTech/Cryptocurrency

Under the "FinTech/Cryptocurrency" category, the OCC mentioned that for banks making significant operational changes through the use of financial technology and other innovations, supervisory agencies should thoroughly evaluate the actual implementation, including the adoption of cloud computing, AI, and digitized processes for risk management.

Last year, under the leadership of former Acting Comptroller Brian Brooks, the OCC announced that federally regulated financial service providers could offer cryptocurrency custody services to the public without requiring special authorization.

Following Brian Brooks' departure, the position of Comptroller remains vacant, and Michael Hsu is serving as Acting Comptroller. Hsu has frequently highlighted the high risks associated with cryptocurrencies and has drawn parallels between DeFi/cryptocurrencies and credit default swaps during the 2008 financial crisis.