Strengthening Sanctions: Solutions to Curtail the Evasion of International Economic Sanctions Through the Use of Cryptocurrency

Abstract

Despite the ubiquity of cryptocurrency, no international uniform regulatory system exists. State-by-state regulation of cryptocurrencies has problematic implications for cross-border investigations and predictability in application. Moreover, this regulatory framework leaves open opportunities for actors worldwide to violate international sanctions with impunity. This Note posits that an international regulatory framework is necessary to combat the evasion of financial sanctions on practical and theoretical grounds. It further argues that the best way to structure this new framework is through the enactment of a new multilateral treaty. A formal international regulatory mechanism for cryptocurrencies would have numerous benefits, foremost among them limiting the evasion of international sanctions. An international regulatory mechanism would also promote predictability in the regulation of cryptocurrencies. This would in turn entice institutional investors to build out the field of crypto users and encourage stability in an otherwise volatile marketplace. The proposal outlined within this Note goes beyond standard legal justifications for a multilateral mechanism. It drills down into the substantive mechanisms that an effective treaty must include, such as public key cryptography; an international public key directory; prosecution guidelines; and foreign fine credits. The levels of specificity to this end are perhaps uncommon in a typical legal proposal. However, this analysis is essential to explain why a new, multilateral treaty is required. The current structures in place cannot begin to grapple with the complex underlying issues which are so crucial to the regulation of cryptocurrency. The substantive components of the proposed treaty undergird the very reason why a new multilateral treaty is necessary.