The cryptocurrency landscape is experiencing a significant credibility issue as several licensed exchanges blatantly provide services to users from Iran, despite clear sanctions imposed by the U.S. Treasury”s Office of Foreign Assets Control (OFAC). This trend of selective compliance not only creates an uneven playing field but also jeopardizes the integrity of the entire sector.
According to OFAC regulations, cryptocurrency exchanges are specifically prohibited from processing transactions for Iranian individuals, accepting Iranian identification for Know Your Customer (KYC) verification, facilitating conversions of Iranian rials, and offering services from Iranian IP addresses. The penalties for such violations can be severe, including hefty fines, asset freezes, and potential criminal charges. However, recent evidence suggests that these rules are being systematically ignored across various platforms.
LBank is one prominent example, as it continues to serve Iranian users despite having regulatory licenses that mandate compliance with sanctions. The platform not only accepts Iranian national IDs for KYC but also allows registration using Iranian phone numbers. Community managers have confirmed that users from Iran face no restrictions when accessing the platform. Moreover, geographic detection features are reportedly implemented to provide Iran-specific functionalities when users connect from Iranian IPs, indicating a willful effort to accommodate these users rather than merely overlooking them.
Similarly, Bitunix appears to be engaging in calculated breaches of sanctions while still maintaining its regulatory licenses. The platform has been known to process Iranian national IDs for account verification and accepts Iranian phone numbers for registration, alongside offering complete access from Iranian IP addresses. Customer support has explicitly confirmed that Iranian users are accepted, which raises serious concerns about intentional violations of international sanctions.
Toobit takes a sophisticated approach by accepting Iranian phone numbers and processing Iranian national IDs through its KYC system while maintaining unrestricted access for Iranian users. This targeted accommodation demonstrates a clear pattern of non-compliance with sanctions, despite the licenses they hold.
Tapbit adds to the narrative by using the term “Persia” instead of “Iran” to obscure its sanction violations. They too accept Iranian identification documents for KYC and have customer support that confirms access for Iranian users. This tactic of using euphemisms to mask compliance failures raises further ethical questions within the industry.
The consequences of these non-compliant actions extend beyond the individual exchanges, impacting the broader market. Compliant exchanges that invest heavily in geo-blocking and monitoring systems are at a significant disadvantage compared to these competitors who ignore regulations. As these non-compliant platforms gain access to a vast market of potential users, compliant exchanges face an untenable competitive imbalance.
Historically, violations of compliance have led to significant repercussions for exchanges. For instance, Binance faced a $4.3 billion settlement in 2023, while Poloniex incurred a fine of $7.6 million. Currently, BingX is under investigation for similar infractions. However, the current climate appears to be increasingly brazen, with exchanges actively advertising services to Iranian users rather than attempting to maintain plausible deniability.
The implications are profound. Each violation fuels skepticism from critics who argue that cryptocurrencies primarily facilitate illicit activities. When licensed exchanges openly serve sanctioned markets, the call for self-regulation within the industry becomes increasingly untenable. This scenario is likely to lead to stricter oversight for all operators, increased compliance costs across the board, and potentially reduced institutional adoption of cryptocurrency technologies.
In conclusion, the brazen disregard for sanctions by major exchanges is not merely a technical oversight but a flagrant act of non-compliance that undermines fair competition and regulatory credibility. In an industry that prides itself on innovation and integrity, accepting such fundamental rule-breaking signifies a grave failure. Compliant operators deserve a fair market environment, and users merit an industry that upholds ethical standards. The pressing question remains not if enforcement actions will arise, but when and with what severity.
