Italy's Banca d'Italia Mandates Crypto Sanctions Screening

Key facts

• Italy's central bank, Banca d’Italia, has mandated crypto asset service providers (CASPs) to screen crypto transfers for sanctions compliance.
• CASPs must establish policies and internal controls to identify transactions linked to sanctioned entities.
• The directive aims to curb illicit financial flows and prevent the use of cryptocurrencies by sanctioned entities.
• Recent reports indicate significant crypto flows used by Iranian and Russian entities to circumvent sanctions.

Italy's central bank, Banca d’Italia, has issued a directive requiring cryptocurrency asset service providers (CASPs) to implement internal controls for screening crypto transfers against European Union financial sanctions. The move is intended to combat illicit financial flows and prevent sanctioned entities from utilizing digital assets to bypass restrictions.

CASPs are now obligated to establish policies and internal controls to ensure they identify and flag any cryptocurrency transactions linked to sanctioned individuals or entities. This directive aligns with broader EU efforts to strengthen the regulatory framework surrounding digital assets and prevent their misuse for illicit purposes.

The central bank's action comes amid growing concerns about the use of cryptocurrencies by sanctioned entities, particularly from Russia and Iran, to evade financial restrictions. Reports highlight significant transaction volumes and flows involving stablecoins and exchanges linked to these sanctioned entities.

For instance, the Russian ruble-backed A7A5 stablecoin reportedly processed $110 billion in cumulative transactions between February 2025 and May 2026, despite being targeted by Western sanctions. Iran's central bank has also reportedly eased foreign currency controls to encourage the use of cryptocurrencies like Tether's USDt and Bitcoin for cross-border transactions to circumvent sanctions.

In recent enforcement actions, US Treasury Secretary Scott Bessent announced on July 14 that authorities had frozen over $130 million in crypto assets linked to Iran's central bank. Furthermore, blockchain analytics firm TRM Labs reported that over $3.8 billion in flows occurred between the crypto exchange CoinEx and sanctioned Iranian entities over a seven-year period.