Your Crypto Is Frozen. Find Out Why Before You File Anything

Somewhere this month, a compliance officer is preparing a report to the U.S. Department of the Treasury’s Office of Foreign Assets Control ("OFAC") that lists your frozen tokens—or perhaps no one is preparing such a report because your tokens were never blocked in the first place. The 2026 Annual Report of Blocked Property is due September 30, and OFAC’s filing guidance lists digital assets and cryptocurrency among the reportable asset types.

Whether your tokens were blocked under OFAC sanctions or frozen for another reason determines what you can do next. But the notice from the cryptocurrency exchange may say only that your account is "under review," without telling you whether the platform imposed its own restriction, implemented a stablecoin issuer’s freeze, blocked the tokens under an OFAC sanctions authority, or responded to government process.

Those mechanisms can look identical, but they may involve different decision-makers, procedures, and deadlines. Choosing the wrong path can cost months.

Four mechanisms, one symptom

OFAC administers sanctions authorities requiring U.S. persons to block certain property. The person with possession or control—often an exchange or custodian—implements the block by denying access to the property. But not every frozen account reflects an OFAC block.

Sanctions blocking. A U.S. person determines that property in its possession or control is subject to a blocking requirement. The holder must deny access and report the property.

Platform restriction. An exchange or custodian restricts an account under its own compliance or risk controls. That business decision does not establish that the property is legally blocked.

Issuer-level freeze. A stablecoin issuer uses technical controls to prevent transfers involving an address. It may act under private policies, in response to government process, or to comply with sanctions or other law.

Government seizure or restraint. A warrant, seizure order, restraining order, or forfeiture proceeding places property under government control or restricts its disposition.

The categories can overlap. The first objective is to identify every asserted basis for the restriction.

Ask the holder what happened

Counsel should ask the holder to identify the asserted legal authority, any applicable sanctions program and blocked interest, whether the holder filed a blocked-property report, any identifiers assigned through the OFAC Reporting System ("ORS"), and any related government process, contractual provision, or internal policy.

A U.S. person holding blocked property must file an initial report "within 10 business days from the date that property becomes blocked." 31 C.F.R. § 501.603(b)(1)(i). Property still blocked and held as of June 30 of the current year must appear in an annual report due September 30. 31 C.F.R. § 501.603(b)(2)(i). Blocked virtual currency follows the same schedule, and a U.S. person is not required to convert it into fiat currency or place it in an interest-bearing account. OFAC FAQ 646.

Request confirmation that the report was filed, a copy if the holder will provide one, and any ORS identifiers. But silence is not conclusive: the regulation requires reporting to OFAC and does not require the holder to provide that information to the owner.

Three OFAC procedures to distinguish

Once sanctions blocking is confirmed, the correct procedure depends on what is being challenged.

A specific license authorizes an otherwise prohibited transaction. Any person having an interest in the transaction or proposed transaction may apply. 31 C.F.R. § 501.801(b)(1), (b)(2)(i).

An erroneous-block process addresses property that was blocked and reported even though no blockable interest existed. OFAC’s guidance allows the holder to unblock and report the release or request a Compliance Release under 31 C.F.R. § 501.806. Both routes belong to the party that blocked the property. The owner must engage the holder and may also pursue a specific license. OFAC FAQ 1196.

A delisting petition challenges the listing itself. It is available to a sanctioned person or a person owning a majority interest in property that is blocked or otherwise subject to sanctions. 31 C.F.R. § 501.807(a).

In our experience, some restraints turn out to be private rather than OFAC blocks. A stablecoin issuer may have disabled transfers under contractual terms permitting action following a law-enforcement inquiry or suspected prohibited activity, or an exchange may have restricted the customer’s account under comparable terms after receiving such an inquiry.

Other restraints require different leverage

A private platform restriction may implicate the platform’s terms, dispute procedures, and applicable statutory or common-law rights. An issuer freeze requires identifying both the technical act and its legal basis. A government seizure demands immediate attention to the warrant or order, related proceedings, and applicable forfeiture deadlines.

The Guiding and Establishing National Innovation for U.S. Stablecoins Act (the "GENIUS Act") will add another layer to issuer freezes. Once its relevant provisions take effect, a permitted payment stablecoin issuer may issue payment stablecoins only if it has the technological capability to comply, and will comply, with the terms of any lawful order. 12 U.S.C. § 5903(a)(6)(B). However, that does not mean every issuer freeze rests on a lawful order.

Conclusion

When an exchange freezes an account, the immediate task is to determine who imposed the restriction and why. Counsel should request the holder’s stated legal basis, ask whether the property was reported to OFAC, and determine whether a warrant, court order, or contractual restriction is involved. Those answers identify the appropriate next step: an OFAC license application, a holder-initiated correction, a delisting petition, a private dispute process, or a response in a forfeiture proceeding.

A frozen account is a symptom, not a diagnosis. Until the legal basis is known, the owner cannot know who has authority to release the property or where relief should be sought. Getting that diagnosis right at the outset can prevent months spent pursuing the wrong remedy from the wrong decision-maker.

By John Q. Foster, Diaz Reus International Law Firm