Sanctions and Sanctions-Resistant Money

In recent years, dollar-based sanctions have become an important tool of U.S. foreign policy. The introduction of bitcoin poses challenges to this sanctions regime. Bitcoin settles transactions through a decentralized, global, permissionless, and competitive market. These characteristics create a degree of censorship resistance. As bitcoin adoption increases, policymakers intent on maintaining the status quo might try to target the bitcoin network for censorship as well. We examine two recent proposals aimed at censoring transactions involving sanctioned entities and assess their likelihood of success. We argue that both proposals are unlikely to achieve their intended outcomes. Instead, a more pragmatic approach to bitcoin is likely to be more effective for those focused on sanctions compliance and enforcement.