For years, regulators around the world have struggled with whether and how to police the offering and exchange of digital assets (including virtual currencies such as Bitcoin). In the United States, such efforts were stymied in part by laws and regulations that did not contemplate the rise of distributed and decentralized payment networks. Efforts at regulation were also hampered, however, by a more fundamental problem – digital assets are not “one” single thing but several, and not all digital assets share the same attributes.

U.S. regulators have lately taken a much more active interest in the issue, however, since Bitcoin’s market surge in early 2018 and amidst the broader popular acceptance of virtual currencies. That has compelled regulators to actually define what digital assets are – securities, commodities, debt instruments, currencies, or something else entirely. The answer will, in part, determine which regulators claim jurisdiction over distributed and decentralized payment networks.

Less conspicuously but no less consequentially, the answer may also determine how the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) administers and enforces U.S. economic sanctions as they apply to transactions involving digital assets. Given the attention OFAC has already paid to distributed and decentralized payment networks, businesses operating in this space should closely watch how other regulators (as well as courts) characterize digital assets and use that as a guide for what obligations might attach under U.S. sanctions law.