Italy’s central bank, Banca d’Italia, has ordered crypto service providers to implement internal controls to screen cryptocurrency transfers linked to sanctioned entities. The move will help enforce European Union (EU) financial sanctions and curb the use of digital assets for illicit activities.
Based on the bank’s announcement, crypto asset service providers (CASPs) must put policies and internal controls in place to enforce EU financial sanctions when processing crypto transfers.
The central bank also said that CASPs must have the necessary controls to identify customers and transactions linked to sanctioned entities.
This means crypto service providers need to check both the people using their services and the transactions being processed to help prevent restricted entities from moving funds through crypto.
Crypto Increasingly Used to Avoid Sanctions
The new requirements come as cryptocurrencies are increasingly being used by Iranian and Russian entities to avoid financial sanctions.
One example is A7A5, a Russian ruble-backed stablecoin that has been targeted by Western sanctions. According to blockchain security platform CertiK, the stablecoin processed around $110 billion in overall transactions between February 2025 and May 2026 despite being targeted by sanctions.
There have also been reports that Iran is encouraging the use of cryptocurrencies for cross-border transactions.
Iran’s central bank reportedly eased some foreign currency controls to allow businesses to use cryptocurrencies such as Tether’s USDt (USDT) and Bitcoin (BTC) to settle some transactions through Iranian exchanges and avoid financial sanctions.
These developments have raised concerns among regulators because digital assets can be used to move value across borders without relying on traditional financial systems.
Italy Moves to Strengthen Crypto Compliance
The issue has also led to action from other authorities. On July 14, U.S. Treasury Secretary Scott Bessent said that American authorities had frozen wallets linked to Iran’s central bank containing more than $130 million in cryptocurrency.
In June, blockchain analytics company TRM Labs reported more than $3.8 billion in flows between crypto exchange CoinEx and sanctioned Iranian entities over more than seven years.
These cases show why regulators are increasing their focus on sanctions screening in the crypto sector. By requiring CASPs to establish internal policies and controls, Italy’s central bank is strengthening the checks used when processing crypto transfers.
For crypto service providers operating in Italy, the requirement means that sanctions compliance needs to be part of their transfer processing controls. CASPs, on the other hand, will need to identify customers and transactions connected to sanctioned entities and apply the necessary EU financial sanctions.
The new regulation also emphasizes the growing importance of stronger compliance controls as cryptocurrencies continue to be used for cross-border transactions.
