Blacklisting Crypto (and More)

41 Pages Posted: 22 Aug 2022 Last revised: 21 Nov 2022

See all articles by Nizan Geslevich Packin

Nizan Geslevich Packin

University of Haifa - Faculty of Law; City University of NY, Baruch College, Zicklin School of Business; City University of New York (CUNY) - Department of Law

Hadar Yoana Jabotinsky

Tel Aviv University - Cegla Center for Interdisciplinary Research of the Law; The Hadar Jabotinsky Center for Interdisciplinary Research of Financial Markets, Crises and Technology (HJC)

Date Written: August 16, 2022

Abstract

The U.S. Treasury’s blacklisting of Tornado Cash – a crypto mixing service – that potentially exposed trolled celebrities such as Jimmy Fallon and Logan Paul to criminal liability, continues a recent years’ reliance of policy-makers on blacklisting as a significant tool in their arsenal. Yet, the concept of blacklisting is not new. Historically, being a blacklisted entity meant having a negative reputation of an entity that cannot be trusted or has done something wrong. Regulatory blacklisting, based on a similar notion, enables lawmakers and public officials to enforce regulatory standards on businesses, individuals, organizations and even jurisdictions by using signaling economy and sanctions. However, as we have seen in recent months, with the blacklisting of Russian corporations by the Biden Administration in an attempt to stop Russian aggression against Ukraine, this regulatory tool is not always effective in reaching the goals it is meant to achieve.

This Article explores using blacklisting as a regulatory tool. Doing so, this Article examines the impact of any related explicit and implicit sanctions, especially as such sanctions include reputational damage, increased hardship in getting credit, and the potential costs of “doing business.” Additionally, the Article makes the important distinction between being blacklisted for participating in or advancing an illegal activity, or failing to comply with binding legal requirements, and being blacklisted for moral or ethical reasons, as, for example, President Trump’s administration perceived the case with TikTok – the Chinese social platform – should be. It explains why distinguishing between the two matters. It further discusses why sanctions do not always work and derive policy recommendations for regulators in order to increase the effectiveness of blacklisting as a regulatory tool, while still examining the problematic nature of regulation by enforcement.

Keywords: Blacklisting, Law and Economics, Sanctions, Cryptocurencies, Regulation by Enforcement

JEL Classification: K00, K22, K42, M00

Suggested Citation

Packin, Nizan Geslevich and Jabotinsky, Hadar Yoana and Jabotinsky, Hadar Yoana, Blacklisting Crypto (and More) (August 16, 2022). Available at SSRN: https://ssrn.com/abstract=4191650 or http://dx.doi.org/10.2139/ssrn.4191650

Nizan Geslevich Packin

University of Haifa - Faculty of Law ( email )

Mount Carmel
Haifa, 31905
Israel

City University of NY, Baruch College, Zicklin School of Business ( email )

One Bernard Baruch Way
New York, NY 10010
United States

City University of New York (CUNY) - Department of Law ( email )

New York, NY
United States

Hadar Yoana Jabotinsky (Contact Author)

The Hadar Jabotinsky Center for Interdisciplinary Research of Financial Markets, Crises and Technology (HJC) ( email )

29 Ha'Oren St.
P.O Box 80
Timrat, 23840
Israel

Tel Aviv University - Cegla Center for Interdisciplinary Research of the Law ( email )

Ramat Aviv
Tel Aviv, IL
Israel

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