U.S. authorities are increasingly targeting crypto wallets, sanctioning cryptocurrency intermediaries, and pursuing asset freezes and seizures as tools of foreign policy punishment. As government enforcement capabilities expand into the digital realm, what safeguards prevent sanctions-related powers from being used against lawful cryptocurrency holders?
This summer, Treasury Secretary Scott Bessent said the U.S. would probably seize another $1 billion in Iran-linked cryptocurrency (garnering the now famous “dwarfish thief” remark by Iran), and just last week, on Oct. 16, he increased his threat by telling Greta Van Susteren at Newsmax’s Policy Summit in Washington, D.C that the Office of Foreign Assets Control knew where the assets were. Reporting did not establish whether those assets were already frozen or whether the proposed seizure would be additional to earlier enforcement actions.
A month prior to his Newsmax interview, on September 17, Treasury sanctioned BitBank, an Iranian cryptocurrency operation linked to financier and sanctioned billionaire Babak Zanjani, explicitly targeting Tehran’s digital-asset sanctions-evasion infrastructure.
What we are seeing now is something that really became public in the Covid years in Canada when they froze the Bitcoin (CRYPTO: BTC) wallets of truckers protesting emergency public health measures. This isn’t hypothetical anymore. Governments can and will go after crypto; they can find crypto, and they can stop owners from accessing cryptocurrencies they own.
“The bigger long-term concern is mission creep,” said Stefan Muehlbauer, Head of US Government Affairs at CertiK, a New York–based cybersecurity company that specializes in securing blockchain and Web3 systems.
Governments Are Coming After Crypto
For now, this should not worry the retail crypto trader. Unless they are up to no good. But the trend is clear, governments are going after crypto as digital currencies are seen not only as a major tool for sanctions evasion, but as another way to commit fraud.
“Crypto is increasingly becoming part of the economic warfare toolbox because it is now significant enough to matter to both sanctioned states and the governments trying to isolate them,” said Muehlbauer.
“Digital assets can provide alternative financial rails, and public blockchains give governments powerful tools to trace illicit flows,” he said. “The policy response should focus on bad actors and the points where they interact with the financial system, rather than treating crypto itself as the threat.”
Crypto is becoming part of state-supported international trade and financial infrastructure, not simply a tool for individual sanctions evaders. In a way, that makes them Western sanction-proof as the West can only sanction use of its currency – the dollar or euro.
The same stablecoins that help sanctioned actors move dollars internationally can be frozen through cooperation between issuers and enforcement authorities. This is potentially a new target for Western governments who may see something like the A7A5 coin as a tool to thwart sanctions.
On Sept. 28, a Senate Democratic-led report examined 846 wallets sanctioned in connection with Iran and found that 84% had transacted in Tether’s USDT stablecoin.
Senator Richard Blumenthal (D-CT) requested the Treasury Department “conduct a thorough investigation of Tether’s anti-money laundering and sanctions compliance practices. If your investigation finds Tether has violated the Bank Secrecy Act, the International Emergency Economic Powers Act, or any other relevant provision of federal law, I encourage you to take the strongest appropriate action.”
Once the report was released, Tether reportedly froze nearly $550 million in those funds, Reuters reported.
For some in the crypto community who are wary of government overreach, this is a step in the direction of them crossing a red line. Crypto was supposed to be anonymous and nearly void of government control. It was the digital gold bar stored in a personal vault; untouchable. That story the crypto community has told itself for a generation is waning.
“Governments can sanction addresses, pressure regulated intermediaries, and restrict access to financial infrastructure, but that is still different from having unrestricted control over privately held Bitcoin,” said Muehlbauer. “But as these enforcement capabilities expand, clear legal standards and due process will be essential to ensure tools developed for national security are not eventually used against political opponents or lawful users.”
Chainalysis estimated in March that the value received by sanctioned entities rose 694% in 2025, as state-backed sanctions evasion became a larger driver of cryptocurrency-related illicit flows.
Crypto is obviously being used to transfer and preserve economic value across borders in ways that challenge conventional financial restrictions, and watchdogs. Public blockchains create new opportunities for governments to track transactions and intervene.
Cryptocurrency’s integration into mainstream global finance has made it valuable to those seeking to evade sanctions and to governments seeking to enforce them. The resulting struggle will help determine how much financial independence cryptocurrency can actually provide in the future.
The writer invests in Bitcoin.
Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.
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