When Compliance Becomes Optional: How Major Crypto Exchanges Continue Serving Sanctioned Markets
Major cryptocurrency exchanges are quietly sidestepping international sanctions—and regulators are struggling to keep up.
The Compliance Shell Game
Behind polished corporate statements about 'global standards,' trading platforms maintain backdoor access to restricted jurisdictions. They use layered corporate structures, offshore entities, and VPN-friendly interfaces that make geographic restrictions laughably easy to bypass.
The Regulatory Blind Spot
Enforcement agencies play whack-a-mole with shadow operations. By the time one channel gets flagged, three more have sprouted—proving that in crypto, compliance often trails innovation by about eighteen months and several billion in trading volume.
Market Forces vs. Rulebooks
Where there's demand, liquidity finds a way. Sanctioned markets represent massive, underserved user bases willing to pay premium spreads. For exchanges, that math often outweighs theoretical regulatory risks—especially when penalties look like parking tickets compared to revenue.
It's the ultimate regulatory arbitrage: building billion-dollar businesses in the gray zones traditional finance abandoned. Just don't expect to read about it in their transparency reports.
The Rules Being Broken
OFAC sanctions explicitly prohibit cryptocurrency exchanges from:
- Processing transactions for Iranian residents
- Accepting Iranian identity documents for KYC
- Facilitating Iranian rial conversions
- Providing services from Iranian IP addresses
Violations carry severe penalties: multi-million dollar fines, asset freezes, and criminal prosecution. Yet evidence shows systematic violations across multiple platforms.
The Evidence
LBank: Active Accommodation
LBank, despite regulatory licenses requiring sanctions compliance, actively serves Iranian users through multiple channels:
- Accepts Iranian national IDs for KYC verification
- Enables Iranian phone numbers (+98) for registration
- Community managers confirm Iranian users face no restrictions: https://t.me/LBank_en/5849500
- Video evidence of signup with Iranian IP: https://drive.google.com/file/d/1lTIlMp2Q5H9Pp0FbUK8qqmPz6N4d-7l3/view
The platform implements geographic detection that enables Iran-specific features only when accessed from Iranian IPs, suggesting deliberate accommodation rather than oversight.
Google Trends data confirms sustained Iranian user engagement: https://trends.google.com/trends/explore?q=LBank
Bitunix: Systematic Violations
Bitunix demonstrates calculated circumvention of sanctions while maintaining regulatory licenses:
- Processes Iranian national IDs for verification
- Accepts Iranian phone numbers for registration
- Maintains full platform access from Iranian IP addresses
- Customer support explicitly confirms Iranian user acceptance
The platform’s deliberate targeting of Iranian users, despite operating under licenses requiring OFAC compliance, represents willful violation of international sanctions.
Toobit: Deliberate Targeting
Toobit shows perhaps the most sophisticated approach to serving Iranian users:
- Accepts Iranian phone numbers for account verification
- Processes Iranian national IDs through KYC system
- Maintains unrestricted access from Iranian IP addresses
- Shows consistent Iranian search traffic in market data
The platform’s targeted accommodation of Iranian users, while holding licenses requiring sanctions compliance, demonstrates systematic circumvention of regulations.
Tapbit: Using “Persia” to Obscure Violations
Tapbit employs deceptive terminology to mask its sanctions violations:
- Uses “Persia” instead of “Iran” to obscure servicing
- Accepts Iranian identification documents for KYC
- Customer support explicitly confirms Iranian user access: https://drive.google.com/file/d/1883oXEIR3_VRwvSMfaCo0UXXmE_7ce8H/view
- Community manager approval on video: https://drive.google.com/file/d/1flh66Gd9bfqisCX_qiL-Bvy4LN45aqo0/view
The Competitive Distortion
Compliant exchanges investing millions in geo-blocking and monitoring systems operate at severe disadvantages. They lose volume to competitors who simply ignore sanctions, creating a fundamentally unfair marketplace.
When non-compliant platforms access markets worth millions of users that rule-following exchanges must refuse, the competitive imbalance becomes untenable. It’s equivalent to requiring some competitors to follow regulations while others operate freely.
Historical Context
Previous violations resulted in serious consequences:
- Binance: $4.3 billion settlement (2023)
- Poloniex: $7.6 million fine
- BingX: Currently under investigation for similar violations
Yet current violations appear more brazen, with exchanges openly advertising Iranian services rather than maintaining plausible deniability.
Industry Impact
Each violation provides ammunition to critics claiming cryptocurrency primarily serves illicit purposes. When licensed exchanges openly serve sanctioned markets, arguing for self-regulation becomes impossible.
This forces:
- Stricter oversight for all operators
- Higher compliance costs industry-wide
- Banking restrictions on crypto businesses
- Reduced institutional adoption
The Bottom Line
Multiple major exchanges demonstrably serve Iranian users despite clear legal prohibitions. This isn’t technical oversight but willful non-compliance that undermines fair competition and regulatory credibility.
For an industry claiming to revolutionize finance, accepting such fundamental rule-breaking represents profound failure. Compliant operators deserve a level playing field. Users deserve an industry operating with integrity.
The question isn’t whether enforcement will come, but when and how severely. In financial services, the compliance bill always comes due, and it’s always higher than expected.
