Sanctions enforcement and compliance in cryptocurrency markets: evidence from regulated and offshore exchanges

Purpose This study aims to assess whether financial sanctions announcements shift cryptocurrency trading volume between exchanges operating under different regulatory regimes and, in particular, whether trading migrates from regulated to offshore venues where sanctions might be evaded. Design/methodology/approach Daily volume for eight major centralized exchanges over 2018–2024 is analysed around 12 sanctions announcements using an event study, a panel regression and a model of the offshore trading share, with three event windows (±1, ± 3, ±5 days). Findings Sanctions announcements produce short-run changes in trading activity that are event-specific and mixed in direction rather than a uniform decline. There is no support for the regulatory–arbitrage hypothesis: the offshore share of trading does not rise at any horizon from 20 days before to 20 days after an announcement, and this null holds when the largest offshore exchange is excluded, under alternative inference and under controls for secular trends. Point estimates are negative rather than positive, but they are not dated to the announcements and do not survive time-trend controls, so they are reported as descriptive rather than causal. Originality/value The study provides exchange-level evidence on sanctions effectiveness, where previous work examined blockchain transactions or aggregate volume. The results contradict the widespread view that trading migrates from regulated to offshore centralized exchanges, although the design addresses venue choice among centralized exchanges and cannot rule out evasion through decentralized exchanges, peer-to-peer transfers or privacy assets. Cryptocurrency adoption and exchange-level trading behaviour need to be distinguished when assessing regulatory effectiveness.