When criminals exploit blockchain: determining personal jurisdiction in a decentralized digital environment

Abstract

In August 2022, the U.S. Treasury Department imposed sanctions on Tornado Cash, a decentralized virtual currency mixer operating on the Ethereum blockchain, marking the first time the Office of Foreign Assets Control (OFAC) targeted software as a sanctionable entity. This action led to the arrest of a developer in the Netherlands, highlighting the complexities of asserting jurisdiction over decentralized software with a global user base. Traditional jurisdictional claims, based on citizenship, residency, or assets passing through a country’s territory, are challenged by blockchain’s distributed nature, where nodes span multiple countries. This creates a dilemma: either numerous nations could claim jurisdiction, exposing users to conflicting criminal laws in jurisdictions with minimal connection, or limited jurisdiction could enable exploitation by malicious actors. The article adopts a comparative approach to analyze the difficulties in establishing criminal jurisdiction for cryptocurrency-related crimes. It examines how the global, decentralized structure of blockchain technology complicates traditional legal frameworks, proposing a balanced approach to protect individual rights while enabling prosecution of bad actors. By exploring case studies and jurisdictional challenges, the study underscores the need for clear legal standards to address transnational crypto-crimes effectively.