Ethereum MEV-relay bloXroute to deny OFAC-listed transactions, escalating crypto censorship debate

Ethereum MEV-relay bloXroute labs said it will reject blocks containing transactions from addresses listed on the Office of Foreign Assets Control’s (OFAC) Specially Designated Nationals And Blocked Person List (SDN) list starting Dec. 18.

In a Dec. 18 statement on X (formerly Twitter), the firm said:

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

Censorship resistant concerns

Since Ethereum transitioned to a Proof of Stake network, one of the significant issues community members have raised was that of OFAC-compliant blocks. Many in the community argue that these blocks would compromise Ethereum’s neutrality by excluding transactions from addresses on the SDN list.

Nikita Zhavoronkov, the lead developer at Blockchair, explained how bloXroute’s move could eventually result in a 51% attack against the blockchain network.

According to Zhavoronkov:

“With ETFs and Blackrock coming, Bitcoin and other major cryptos are adhering more and more to compliance and KYC, so we can expect more pools following “rules”. Once 51%+ are compliant, there’s a high chance we’ll be mere months away from the miner majority beginning to orphan blocks containing sanctioned transactions. A state of a constant 51% attack. If you, as a miner, don’t follow the OFAC list, your blocks will get rejected, and you’ll be out of business.”

Data from Mevwatch showed that OFAC-compliant blocks on the network currently sit at 32%, a steep decline from last year when around 80% of the blocks were compliant with the regulatory authorities.

bloXroute commit to Ethereum decentralization

bloXroute Labs emphasized its commitment to upholding Ethereum’s decentralized and permissionless principles while ensuring compliance within the legal frameworks of its jurisdictions.

According to the company, the blockchain network’s strength lies in its decentralization and global distribution, making it resilient against singular influences, even those leveraging advanced networking technologies.

Meanwhile, bloXroute Labs’ shift in policy adds to the ongoing debate surrounding censorship resistance within the broader crypto ecosystem. Numerous crypto companies, including stablecoin company Tether, have significantly improved their collaborations with authorities as part of their bid to be regulatory compliant.