Comment by kube-system | Hacker News Reader

Comment by kube-system | Hacker News Reader

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(edit: If the money is from Tornado Cash), the money is sanctioned, he has to block it from being used anywhere and he must report it within 10 days according to the law (although the treasury realizes that many people receiving this money don't have legal compliance on staff and so they're cutting people slack)

> U.S. persons may have received unsolicited and nominal amounts of virtual currency [...] from Tornado Cash, [...] Technically, OFAC’s regulations would apply to these transactions.

> Once a U.S. person determines that they hold virtual currency that is required to be blocked pursuant to OFAC's regulations, the U.S. person must deny all parties access to that virtual currency, ensure that they comply with OFAC regulations related to the holding and reporting of blocked assets, and implement controls that align with a risk-based approach.

> 31 C.F.R. Parts §§501.603 and 501.604 require blocking and reject reports to be submitted to OFAC within 10 business days

> A report of blocked property is to be submitted annually by September 30

https://home.treasury.gov/policy-issues/financial-sanctions/...

The only thing that was donated here is a legal compliance headache that will continue for years to come.

> No, the money is sanctioned, he has to block it from being used anywhere and he must report it within 10 days according to the law

This is not correct.

> U.S. persons may have received unsolicited and nominal amounts of virtual currency [...] from Tornado Cash

Because he did not receive those funds from Tornado Cash. He received them from a third party. This third party has interacted with a sanctioned entity (Tornado Cash), but sanctions are not transitive.

You can test this easily w/o cryptocurrency: You may not be allowed to transact with Iran, but you can buy stuff from a Germany company which has business with Iran - until OFAC may want to decide to sanction the Germany company.

The "dusting attacks" the OFAC FAQ refers to are transactions that someone sends directly from the TC smart contract to your wallet.

> Because he did not receive those funds from Tornado Cash.

Fair, I made the comment under the assumption that the title of this submission was accurate.

> the U.S. person must deny all parties access to that virtual currency

With Bitcoin that would be relatively straightforward: Just ignore the UTXO because the incoming funds are clearly separated from any preexisting funds.

But with Ethereum that's different due to the account-based approach: What's the impact if those funds are intermingled with preexisting funds on the same Ethereum address? Is it now unsafe to spend any of those funds or can existing funds be spent as long as the minimum balance doesn't fall below the amount of sanctioned funds?

Also what's the impact in terms of taxes: Could there be a situation where Redox OS needs to pay taxes on those 299 Ether but at the same time is not able to disburse them? Due to the high crypto volatility this could become a headache quickly: Imagine having to pay taxes for this year, but then due to the sanction only being able to actually sell those Ether in a later year when the price could be potentially a lot less than the tax liability.

The OFAC is just looking for the money to be blocked. At least, that's what it sounds like:

https://home.treasury.gov/policy-issues/financial-sanctions/...

I don't think that sanctioned money is income, but these are all good questions that I'd be asking my lawyer/IRS/treasury if I got a donation like this.

I appreciate OFAC being reasonable; it’d be nice if they used Chainalysis to track the digital asset movement and give folks a way to tag their wallet with AML/KYC info for automated compliance purposes. These are public ledgers after all, the reporting does itself for the most part.

Can you send the asset to an OFAC address for seizure and custody to wipe your hands of the issue?

I was thinking if I was receiving this Donation, the amount of stress and anxiety it would cost me in the aggregate would surpass any kind of monetary benefit.

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