Treasury's Iran Sanctions Leave DeFi Protocol Question Open
Treasury's Iran sanctions target digital assets but not decentralized protocols. Coin Center's Van Valkenburgh says the silence cuts both ways, citing the Berman amendment.
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The Treasury launched Operation Economic Outcast on Aug. 24, naming digital assets as one of five sanctionable sectors in Iran's economy. The action expands secondary sanctions to anyone doing business with the regime's digital asset economy. It does not define what operating in the digital assets sector means, and it makes no mention of decentralized protocols.
Peter Van Valkenburgh, executive director of Coin Center, said the release is "fairly neutral" on the question of non-custodial infrastructure. Speaking on the Unchained podcast on Aug. 26, he said the government has not ruled out going after nodes, relayers, miners or software developers. "They haven't ruled that out," he said.
He contrasted that with the custodial targets he believes enforcement should focus on: Iranian exchanges, front companies, money networks and brokers. Those are "the people who actually know exactly who they're dealing with, are happy to deal with them, have agency and fiduciary sort of control over the money as it moves," he said. Going after protocols, he argued, would cause "tons of collateral damage" while leaving the human brokers untouched.
Van Valkenburgh pointed to a limit in sanctions law that bears directly on the developer question. The Berman amendment, added to the International Emergency Economic Powers Act in 1988 and broadened in 1994, bars the use of sanctions powers against information or informational materials. Writing and publishing software, he said, is the protected conduct, whatever the software is later used to move. He acknowledged the argument is not naive: "I'm not saying that in the sort of naive way" that a blockchain transaction is merely information, but the software itself is protected.
He also said the compliance layer the Treasury would want already exists at the edges. Stablecoin issuers and front ends do sanctions compliance now. "Uniswap on its front end that it controls has been doing sanctions compliance for a long time," he said, as do Circle and Tether. On public blockchains, sanctioned flows can be watched in real time, which limits how much non-public information sharing enforcement requires.
Van Valkenburgh said the durable approach is to accept that the technology cannot be regulated out of existence and to "find as many paths to legitimize the businesses building on top of these networks as possible." The sectoral determination does not define what constitutes operating in the digital assets sector, leaving the question of decentralized infrastructure unresolved.
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