BloXroute Labs, a key provider of censorship-resistant Ethereum blocks, has decided to censor blocks sanctioned by the U.S. Office of Foreign Assets Control (OFAC), impacting all its maximum extractable value (MEV) relays in compliance with regulations.
On December 18th, BloXroute Labs announced a policy change regarding its MEV relays in a post on X (formerly Twitter), noting:
“Effective immediately, all bloXroute relays will reject block bids if they contain OFAC transactions.”
BloXroute Labs defines an OFAC transaction as any involving a wallet sanctioned by the Office of Foreign Asset Control (OFAC).
Labrys, an Australian-based blockchain development firm, has indicated that all of bloXroute Labs’ relays, including the bloXroute Max Profit relay, will be affected. This relay is the second-largest censorship-resistant MEV relay, generating over 380,000 blocks since the Ethereum Merge on September 15th, 2022.
Despite the policy change, bloXroute Labs reaffirms its commitment to Ethereum’s decentralization and permissionless nature, while ensuring compliance with the law.
While striving for compliance and decentralization balance, some in the Ethereum community express concerns that stricter measures impede the path to credible neutrality on Ethereum.
This “sets a concerning precedent for the industry,” Labry’s CEO Lachlan Feeney said
“Like the internet, censorship should be avoided [at the protocol level], and instead, rules and regulations are best applied at the application level,” Feeney explained.
Feeney, expressing concern given Ethereum’s global nature, notes that more sanctions from various countries could make it nearly impossible to create a block adhering to the regulatory regimes worldwide.
“What happens when China or Russia wants transactions sanctioned? Should these sanctions be applied also, even if they are sanctioning legitimate U.S. businesses?”
MEVWatch.info data reveals that around 36% of blocks are currently being censored due to OFAC-sanctioned transactions, lower than the peak of 78% on November 20th. This percentage has mostly ranged between 30-40% since March.
MEV relays, crucial for validators to extract value from a blockchain, face challenges balancing Ethereum’s credibly neutral nature and compliance with local laws.
Concerns about Ethereum network censorship grew post-transition to proof-of-stake on September 15th, 2022. OFAC’s sanctions on wallet addresses associated with criminals and transactions from crypto mixers, like Tornado Cash, heightened worries.
Many MEV relays confront a dilemma between upholding Ethereum’s credibly neutral nature and complying with local laws in their operating jurisdictions.
Feeney isn’t certain if bloXroute was pressured to comply with regulations, but he believes the decision was made with careful consideration, acknowledging the impact on the success rate of their MEV relays.
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