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Marathon Digital Holdings (NASDAQ: MARA) recently announced that it has launched a Bitcoin mining pool that has certain OFAC sanctions and AML compliance mechanisms built-in. Recently, Marathon announced that it had successfully directed all of its hashrate in the Marathon OFAC Pool.

According to Marathon’s public release, the OFAC Pool is set up with screening technology licensed from DMG Blockchain to filter out those on OFAC’s Specially Designated Nationals and Blocked Persons List (SDN List). In this sense, Marathon asserts that its OFAC Pool will be creating “clean” Bitcoin, free from any U.S. sanctions nexus.

LEGAL TOKENS

It is not exactly clear what other compliance protocols are included in Marathon’s OFAC Pool, including whether location-based screening was incorporated, as well as compliance with OFAC’s 50% Rule. That said, sanctioned jurisdictions, including Iran and North Korea, have flocked to Bitcoin, including via mining operations. This new method of Bitcoin mining could present a unique appeal to U.S. person investors and those that use Bitcoin as transaction means with a U.S. nexus.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm or its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

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Andrew Jacobson | Associate

A former enforcement attorney at the New York State Department of Financial Services (DFS), Andrew Jacobson represents individual and institutional clients at Seward & Kissel in connection with complex governmental investigations, regulatory probes, and related civil matters. While at the DFS, Andrew was involved in early cryptocurrency issues and brought some of the most significant enforcement actions for violations of U.S. economic sanctions and anti-money laundering laws.

Andrew has extensive experience advising on matters relating to U.S. economic sanctions, including those administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC), and anti-money laundering laws. Andrew serves as Chair of the Export Controls, Sanctions, and Anti-Corruption Subcommittee of the International Bar Association, co-chair of the Virtual Commodity Association’s BSA/AML Committee, and is a member of the Digital Chamber of Commerce’s AML Task Force.

As a member of Seward & Kissel’s Blockchain and Cryptocurrency Group, Andrew regularly advises clients on all aspects of financial crimes compliance and licensing in the virtual asset industry, including:

  • OFAC and FinCEN regulatory requirements, including asset blocking and reporting obligations;

  • Unhosted wallets and risks to software providers and VASPs;

  • Privacy coins, mixers, and other external privacy mechanisms;

  • Technology and open-source user platforms;

  • Ransomware and other cyberattack-related ransom payments;

  • BitLicense and state licensing requirements; and

  • Counterparty due diligence and screening.

 

“This is certainly a lesson to senior management to take compliance seriously and that there are consequences for individuals who don’t follow the regulatory regime.”

Andrew’s thoughts on BitMEX indictment, as published in Law360 article “BitMEX Case Seen as Blessing in Disguise for Crypto Sector”

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