USA Law and Practice Contributed by: Gregory Strong, Sarah W. Chen, Brian Farber and Amil Sumaiya Malik, Cahill Gordon & Reindel LLP
Bank Secrecy Act (BSA), which is a comprehensive anti-money laundering (AML)/combating the financ- ing of terrorism (CTF) statute. The BSA mandates that “financial institutions”, which include “money services businesses” and “money transmitters”, must collect and retain information about their customers and share that information with FinCEN. FinCEN guidance from May 2019 examined a number of hypothetical business models involving digital assets to provide guidance with respect to the application of the BSA. Not surprisingly, many businesses engaging in activity involving “convertible virtual currency”, crypto-assets used as a substitute for fiat currency, have an obliga- tion to comply with the BSA. The Treasury Department and the Office of Foreign Assets Control (OFAC) OFAC is a division of the US Treasury Department that administers and enforces economic and trade sanctions to promote US national security and foreign policy objectives. OFAC can take enforcement action against entities in the USA that violate sanctions pro- grammes. OFAC has taken several such actions relat- ing to digital asset transactions – for example, in set- tled actions against BitGo, BitPay and Poloniex, OFAC emphasised that US sanctions compliance obligations apply to all US persons, and encouraged companies that provide digital asset services to implement con- trols commensurate with their risk profile, as part of a risk-based approach to US sanctions compliance. Further, OFAC published Sanctions Compliance Guid- ance for the Virtual Currency Industry in October 2021 to assist participants in the virtual currency industry with navigating and complying with OFAC sanctions. In August 2022, OFAC designated smart contracts associated with the operation of Tornado Cash, a virtual currency mixer, to the Specially Designated Nationals (SDN) list, effectively prohibiting US per- sons from engaging in transactions with these con- tract addresses. This was a significant action and the first time smart contract addresses were added to the SDN list. However, in late 2024, the Fifth Circuit ruled that OFAC exceeded its statutory authority by add- ing the suite of smart contract addresses comprising Tornado Cash to the SDN list, because such smart contracts are not “property” subject to the sanctions jurisdiction asserted by OFAC within the meaning of
the International Emergency Economic Powers Act. Since then, OFAC has removed the Tornado Cash smart contract addresses from the SDN list, revers- ing its earlier position. The Consumer Financial Protection Bureau (CFPB) The CFPB has authority pursuant to the Consumer Financial Protection Act (CFPA) to address unfair, deceptive or abusive acts and practices (UDAAP) with respect to financial products offered primarily for con- sumer use by certain “covered persons” as defined by the CFPA. To date, the CFPB has not been active in the crypto-asset space. However, the CFPB issued significant guidance just prior to the change in administration clarifying how Regulation E of the Electronic Fund Transfer Act (EFTA) applies to digital payments, particularly in the con- text of rising fraud and person-to-person (P2P) pay- ment platforms. While the CFPB had signalled plans to expand oversight – including by examining non- bank financial companies that pose consumer risks and potentially applying that scrutiny to digital asset products – its capacity to act has been substantially undermined by recent court rulings. In particular, deci- sions questioning the constitutionality of its funding structure have raised doubts about the CFPB’s future enforcement authority and agenda, which may delay or constrain the Agency’s ability to regulate emerg- ing financial technologies, despite prior ambitions to The DOJ enforces federal criminal laws, including those involving securities fraud, insider trading and market manipulation, often working in parallel with civil regulators such as the SEC. While the SEC pur- sues civil enforcement, the DOJ has authority to bring criminal securities charges which are often paired with other alleged federal crimes such as wire fraud. increase its activity in this area. The Department of Justice (DOJ) On 7 April 2025, the DOJ issued a memo, “Ending Regulation By Prosecution”, signalling a significant shift in its approach to enforcement related to block- chain technology and crypto-assets. The memo de- prioritises actions against software developers in favour of targeting those who use digital assets to facilitate serious crimes such as terrorism and traf-
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