Banca d'Italia has ordered mandatory sanctions screening for cryptocurrency transfers, directing crypto asset service providers to implement internal controls designed to screen for transfers tied to sanctioned entities and curb illicit financial flows across the European Union.

According to a Monday announcement published on the central bank's website, crypto asset service providers (CASPs) must put policies and internal controls in place to enforce European Union financial sanctions when processing crypto transfers. The directive effectively extends to crypto firms the sanctions-enforcement obligations that banks in the bloc have long carried, since EU restrictive measures apply directly across member states and are enforced at the national level.

The bank added that CASPs should strive to ensure adequate controls to identify customers and transactions linked to sanctioned entities. Sanctions screening is a longstanding compliance function in traditional finance, built on checking customers and counterparties against government-issued sanctions lists, and its explicit application to crypto transfers places digital-asset firms within the same compliance perimeter as conventional financial institutions.

The directive comes as cryptocurrencies are increasingly being used by Iranian and Russian entities alike to avoid financial sanctions. Blockchain security platform CertiK has reported that the Russian ruble-backed A7A5 stablecoin processed $110 billion in cumulative transactions between February 2025 and May 2026, despite being targeted by Western sanctions.

Iran's central bank has also reportedly eased foreign currency controls to encourage businesses to use cryptocurrencies such as Tether's USDt (USDT) and Bitcoin (BTC) to settle cross-border transactions through Iranian exchanges and circumvent sanctions.

US authorities have taken parallel action against Iran-linked digital asset flows. On July 14, US Treasury Secretary Scott Bessent said American authorities had directed a freeze of more than $130 million in crypto held in wallets linked to Iran's central bank.

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.

Together, the EU compliance directive and the US enforcement actions show sanctions policy and crypto markets intersecting at the transaction level, with blockchain analytics firms such as CertiK and TRM Labs supplying much of the data behind both regulatory scrutiny and enforcement. For CASPs in Italy, the requirement's practical effect now hinges on implementation — how screening controls are built into transfer processing and assessed under national supervision.

Source: Cointelegraph