Even Innocent? Your Crypto Can Still Be Frozen—Here’s Why
Your Bitcoin isn't as untouchable as you think. Authorities—and exchanges—have tools to freeze assets without due process. Welcome to decentralized finance's dirty little secret.
The Illusion of Control
Private keys don’t guarantee sovereignty. Chainalysis-powered blacklists let centralized platforms halt transactions mid-flight. One mistaken address flag and—poof—liquidity vanishes.
Regulators’ Backdoor
Tornado Cash sanctions set the precedent. Now, OFAC’s blockchain sleuths treat crypto like traditional banks—freezing first, asking questions never. Compliance teams preemptively ice wallets to avoid seven-figure fines.
Exchange Roulette
Binance and Coinbase routinely restrict accounts flagged by third-party surveillance. Their terms grant unilateral seizure rights—buried in Section 12.3 of that user agreement you skimmed.
So much for "be your own bank." Maybe try a safety deposit box—at least those require warrants. (Just don’t tell the gold bugs we said that.)
The hidden risks of crypto
The promise of crypto—the very idea of Bitcoin (BTC) — has always centered on freedom. Freedom from intermediaries, borders, and the inefficiencies of traditional finance. After two decades of growth and maturity, cryptocurrency’s adoption finally surges, DeFi platforms proliferate, stablecoin adoption becomes widespread, and the necessity for AML transparency and enforcement becomes apparent.
Anti-money laundering, once viewed as an abstract compliance burden for centralized exchanges, is increasingly affecting the entire ecosystem, where transparent compliance and clarity are among the key factors driving investments into the crypto industry. While the trend is clearly showing a decrease in illicit activities in crypto, according to TMR Labs, crypto, like fiat money, will never be free from bad actors and illegal activities.
According to Chainalysis’ recent report, $40.9 billion has been received by illicit cryptocurrency addresses. With that amount of illegal, stolen, and laundered money circulating in the space, freelancers, protocol contributors, DAO members, and traders might easily discover that their crypto isn’t as ‘clean’ as they assumed, and that might be too late. In today’s regulatory climate, a single transfer from a “tainted” wallet can result in frozen funds, account lockdowns, or blacklisted addresses—even when the user has no malicious intent. Tether alone has frozen over $2.5 billion tied to illicit activities. As Paolo Ardoino, Tether CEO, explained:
“Tether’s ability to track transactions and freeze USDT linked to illicit activity sets it apart from traditional fiat and decentralized assets. We take our responsibility to combat financial crime seriously and will continue working closely with global law enforcement agencies to prevent bad actors from exploiting stablecoin technology.”
The reality of crypto is evident: in a financial system built on transparency, hiding malicious activities will be harder and harder. This year alone, we saw many cases. Tether blocked more than $12.3 million worth of funds associated with AML violations. crypto exchange MEXC identified and suspended over 1,500 accounts. Australian Authorities revealed that a total of $123 million was laundered in a crypto scheme. Hong Kong used tokenized legal notices on the blockchain against anonymous owners of illicit wallet addresses.
However, risk is not always about what you do but about where your assets are coming from. Let’s say you’re a freelancer, and a client wants to pay you in USDT or USD Coin (USDC). How would you feel knowing that the money you are receiving is coming from North Korean hackers, or the sanctioned Russian exchange, or is associated with Hamas? With numbers indicating that more than 60% of illegal crypto activity is tied to sanctioned groups or terrorist organizations, the chances of getting that ‘dirty’ money are really high.
And it is not only a moral dilemma; the connections and links to that ‘dirty’ money would have legal consequences for users, resulting in frozen accounts and blocked assets.
How to stay risk-free and safe?
What constitutes “taint” in crypto is defined not only by legal frameworks but also by increasingly sophisticated blockchain surveillance tools. Companies like Chainalysis, TRM Labs, and Elliptic now underpin the compliance protocols. Their systems assess the provenance of funds, assign risk scores to wallets, and flag transactions that come into proximity with illicit activity, including scams, ransomware, darknet commerce, sanctioned entities, and fraud.
Crypto wallet screening is the process of checking a wallet address to see if it’s linked to suspicious or illegal activity — such as scams, money laundering, or sanctioned entities—before sending or receiving crypto. Even if you’re not doing anything illegal, interacting with a “tainted” wallet can get your account frozen or raise red flags with exchanges, especially now that compliance is tightening. For example, if a wallet has received stolen funds or is connected to a sanctioned country, it will show up with a high-risk score. Elliptic and Chainalysis are two examples of wallet screening tools that help users stay safe, avoid compliance issues, and keep their funds from being flagged or frozen.
It means that before accepting any payments in crypto, you can run the sender’s wallet through a screening tool. If it’s clean, you’re good to go. If it’s risky—say it once received funds from a scam — you can ask for a different wallet or reject the payment to protect yourself. Despite the existing tools, few users proactively screen incoming funds or assess the risk of wallets with which they transact. In part, this is due to a lack of awareness. To solve this, we embedded a compliance-grade AML screening into our wallets at Nonbank, so our users could be certain of the clearance of the money they receive.
Nonbank’s approach is conceptually simple but functionally significant. It allows users to route transactions through proxy wallets, effectively isolating exchange-bound funds from unverified sources. A proxy wallet acts as a buffer: users receive funds there first, run automated AML checks on the transaction history and origin address, and only forward clean crypto. If a risk is detected, the transfer can be held or rerouted before triggering exchange-level scrutiny. The metaphor that describes it best is a condom that protects you from undesirable outcomes.
This kind of pre-screening infrastructure transforms the user’s position from reactive to proactive. Rather than being surprised by a frozen withdrawal or delisted account, users can make informed decisions based on risk profiles generated in real time. Nonbank’s features allow users to monitor their exchange wallets and preemptively screen incoming funds before they settle — a significant development in what might be called personalized compliance architecture.
Key takeaways
As the crypto industry matures, the informal norms of early adoption are being replaced by structures of accountability. This is not just regulatory capture; it is an evolutionary response to crypto’s growing role in the global financial system. Privacy remains a goal for many users and builders, but in practice, compliance—voluntary or enforced—is now part of the terrain, which will only further drive mass adoption.
Whether you’re receiving stablecoin payments from clients, contributing to a DAO, or managing on-chain treasuries, integrating AML screening into your workflow is no longer optional. To make it easier and simpler, Nonbank has embedded tools that allow users to do this without ceding custody or resorting to clunky, enterprise-level systems. They represent a new LAYER of crypto hygiene: not just for institutional actors, but for anyone who interacts with value on-chain.
Crypto promised self-sovereignty. That promise still stands. However, sovereignty without foresight is a liability. The solution is not to retreat into maximalist purism or ignore compliance realities, but to adapt on our own terms. That means building and using tools that respect privacy while meeting the standards of a regulated world.
If we want crypto to scale — and to remain accessible for non-tech, ordinary people — we have to treat wallet security as more than a matter of passwords and phrases. It’s now about provenance, flow, and data. And in that context, screening your funds is not just smart — it’s essential.
Andrii Bruiaka is the CEO and co-founder of onicore.io and nonbank.io. He is a fintech entrepreneur with over 10 years of experience in banking and blockchain software development. He leads cross-functional teams of over 100 specialists across engineering, product, and operations.
