Ethereum MEV-relay bloXroute rejects OFAC listing transactions, expanding cryptocurrency censorship debate

Ethereum MEV-relay bloXroute Labs said that starting December 18, it will reject blocks containing transactions from addresses listed on the Office of Foreign Assets Control’s (OFAC) Specially Designated Nationals and Blockers (SDN) list.

In a December 18 statement to X (formerly Twitter), the company said: said:

“Effective immediately, all bloXroute relays will reject block bids if they contain OFAC transactions (transactions that interact with addresses that appear in the OFAC SDN list).”

Concerns about censorship resistance

One of the key issues raised by community members since Ethereum transitioned to a proof-of-stake network was OFAC-compliant blocks. Many in the community argue that these blocks will compromise Ethereum’s neutrality by excluding transactions from addresses in the SDN list.

Nikita Zhavoronkov, lead developer at Blockchair explained Learn how bloXroute’s moves could eventually lead to a 51% attack on blockchain networks.

According to Zhavoronkov:

“With the emergence of ETFs and Blackrock, Bitcoin and other major cryptocurrencies are becoming increasingly compliant and KYC-compliant, so we can expect more pools following the “rules.” If more than 51% are compliant, it will likely only take a few months for the majority of miners to start with orphaned blocks containing approved transactions. 51% attack continues. As a miner, if you don’t follow the OFAC list, your blocks will be rejected and you will go out of business.”

According to data from Mevwatch, the network’s OFAC-compliant blocks are now at 32%, a sharp decline from last year when about 80% of blocks were compliant with the regulator.

bloXroute is dedicated to decentralizing Ethereum.

bloXroute Labs emphasized its commitment to maintaining Ethereum’s decentralized and permissionless principles while ensuring compliance within the legal framework of the relevant jurisdiction.

According to the company, the strength of blockchain networks lies in their decentralization and global distribution, making them resilient to single influences even when leveraging advanced networking technologies.

Meanwhile, bloXroute Labs’ policy change adds to the ongoing debate surrounding censorship resistance within the broader cryptocurrency ecosystem. A number of cryptocurrency companies, including stablecoin company Tether, have significantly improved their cooperation with authorities as part of their efforts to achieve regulatory compliance.