Why Blockchain Base Layers Should Remain Neutral Under Sanctions

Summary

This legal analysis argues that current U.S. sanctions guidance should not require blockchain infrastructure participants to screen or censor blocks involving sanctioned addresses. It frames a blockchain base layer as a public communications and timestamping system: builders, relays, sequencers, pool operators, searchers, and validators help order and attest blocks, rather than directly provide services to a sanctioned party. The authors compare these functions with internet and telephone infrastructure and emphasize risk-based compliance.

The paper also considers possible consequences of imposing censorship duties at the base layer, including network forks, fragmented infrastructure, and development moving offshore. It distinguishes sanctions against controlled wallets or centralized services from the novel designation of smart contract code. This is an opinionated legal argument based on the guidance and facts discussed in the paper, not a binding legal determination; the document itself says circumstances require advice from qualified counsel.

Key ideas

• The authors argue that recording and ordering blocks is not equivalent to facilitating a sanctioned transaction.
• They contend that sanctions compliance programs should reflect each infrastructure participant’s role and use a risk-based approach.
• The paper likens blockchain base layers to communications infrastructure that routes information without inspecting every message.
• It warns that base-layer censorship could fragment networks and shift development offshore.
• The analysis is an interpretation of sanctions law and is not legal advice.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.