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Crypto founders are increasingly looking into geofencing — the act of blocking users in certain jurisdictions — as an “extreme solution” to regulatory uncertainty in the United States.
In a post on X on Sept. 30, Variant Fund chief legal officer Jake Chervinsky <a data-ct-non-breakable="null" href="https://x.com/jchervinsky/status/1840760820046692591" rel="noopener noreferrer nofollow" target="null" text="null" title="null">said</a> that many crypto founders are considering using geofencing as a compliance strategy as regulators in the United States continue their <a data-ct-non-breakable="null" href="https://cointelegraph.com/learn/the-sec-vs-ripple-lawsuit-everything-you-need-to-know" rel="noopener noreferrer nofollow" target="null" text="null" title="null">war</a> on crypto.
In simple terms, geofencing means stopping people in a certain “geography” from accessing a product by creating a virtual “fence” around it, he explained while sharing a <a data-ct-non-breakable="null" href="https://variant.fund/articles/practical-guide-to-geofencing/" rel="noopener noreferrer nofollow" target="null" text="null" title="null">guide</a> summarizing how to properly geofence.&nbsp;
It can be used as a fallback option for a compliance strategy if a company cannot comply with regulations such as providing disclosures and KYC (Know Your Customer).
The company or protocol could simply <a data-ct-non-breakable="null" href="https://cointelegraph.com/news/apecoin-geo-blocks-us-stakers-two-apes-sell-for-1m-each-marketplace-launched" rel="noopener noreferrer nofollow" target="null" text="null" title="null">block users</a> in a country that has strict compliance requirements, in this case, the United States. However, Chervinsky said it was an extreme solution:&nbsp;
<blockquote>
 “It’s a pretty extreme solution to the problem of regulatory uncertainty — completely abandoning the US market — but sometimes there’s just no other way.”
</blockquote>
In 2023, 17 jurisdictions representing 70% of global crypto exposure tightened their crypto regulations, according to TRM Labs.&nbsp;
<a data-ct-non-breakable="null" href="https://cointelegraph.com/learn/decentralized-finance-a-beginners-guide-to-earning-passive-income-with-defi" rel="noopener noreferrer nofollow" target="null" text="null" title="null">DeFi</a> protocol Sky, which <a data-ct-non-breakable="null" href="https://cointelegraph.com/news/maker-rebrands-sky-launches-usds-sky-token" rel="noopener noreferrer nofollow" target="null" text="null" title="null">rebranded</a> from Maker in August, courted criticism after <a data-ct-non-breakable="null" href="https://cointelegraph.com/news/makerdao-spark-protocol-block-vpn-users-controversy" rel="noopener noreferrer nofollow" target="null" text="null" title="null">blocking VPN</a> access for its Spark Protocol. This was done in an effort to prevent US users from accessing the protocol, but it also blocks all IP addresses associated with VPNs regardless of location.&nbsp;
<figure><img alt="Crypto founders increasingly look to ‘geofencing’ amid US uncertainty" name="" src="https://s3.cointelegraph.com/uploads/2024-10/01924609-4762-71c6-87b2-5a8e341d2253">
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 Source: sky.money
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The world’s largest crypto exchange, Binance, also geofences displaying the notice “Binance.com is unavailable in your country or region” if a user were to try to access it from a US IP address.&nbsp;
Meanwhile, Ethereum restaking protocol Eigenlayer <a data-ct-non-breakable="null" href="https://cointelegraph.com/news/eigenlayer-users-complain-restrictive-airdrop-others-say-generous" rel="noopener noreferrer nofollow" target="null" text="null" title="null">blocked</a> users from 30 countries including the US, Canada, China, and Russia from claiming its airdrop in April.&nbsp;
The Solana-based decentralized exchange Orca has also <a data-ct-non-breakable="null" href="https://cointelegraph.com/news/orca-dex-to-block-us-users-from-trading-with-its-interface" rel="noopener noreferrer nofollow" target="null" text="null" title="null">blocked US users</a> from trading using its web interface.&nbsp;
Related: <a data-ct-non-breakable="null" href="https://cointelegraph.com/news/us-competitive-crypto-regulation-banking" rel="noopener noreferrer nofollow" target="null" text="null" title="null">6 things the US needs to stay competitive in crypto, according to execs</a>
Chervinsky’s geofencing guide offers some best practices for geofencing, which include using available information such as IP addresses and GPS data to identify US users and blocking them using multiple methods such as IP blocking, attestations, and VPN monitoring.
It also suggested using infrastructure outside the United States, minimizing American-based hardware and personnel, and using non-US servers and cloud services.
Adopting a geofencing strategy can have some advantages for the company, however.&nbsp;
“Tailored geofences using advanced geolocation data help crypto firms expand into new markets while maintaining compliance,” <a data-ct-non-breakable="null" href="https://www.geocomply.com/blog/balancing-compliance-and-privacy-essential-strategies-for-todays-crypto-firms/" rel="noopener noreferrer nofollow" target="null" text="null" title="null">said</a> compliance solutions provider GeoComply in a September blog post.&nbsp;&nbsp;
Nevertheless, geofencing “is an extreme and costly measure to ensure compliance with US law,” concluded Chervinsky.&nbsp;&nbsp;
Magazine: <a data-ct-non-breakable="null" href="https://cointelegraph.com/magazine/china-crypto-ban-investors/" rel="noopener noreferrer nofollow" target="null" text="null" title="null">How Chinese traders and miners get around China’s crypto ban</a>

Crypto founders increasingly look to ‘geofencing’ amid US uncertainty

Cointelegraph

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