Is it illegal to use geofenced crypto protocols?

So there are a bunch of lending crypto protocols that are geofenced for certain countries,
especially the US. You can still access them easily with a VPN. But is this actually illegal (using VPN to access)? Or is this still a legal gray area that’s being explored ?

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2 thoughts on “Is it illegal to use geofenced crypto protocols?”

  1. It’s legal for end users to use them. Just like it’s legal for an enduser to buy into a ponzi scheme, or buy unregistered securities like 99% of the crypto space. It’s the people who are offering the service that are the ones on the hook (and hence, why they’re geofencing).

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  2. I’m not a lawyer and we’re not being specific about which protocol anyway, but I think the purpose of geofencing is to protect the protocol. They may not comply, or they may not know if they comply, with local regulation. So rather than potentially operate illegally in that country, which could result in a permanent ban from that country, they try not to operate in that country, so that they can operate in that country at a later date, when they are in compliance due to development or further regulatory clarity.

    From that perspective this is probably a ToS issue. In theory, they could sue you for violation of ToS; that is to say, you might be civilly (not criminally) liable. But the vast majority of times a ToS is invoked are in the company defending themselves, and in those cases usually the only action against the user is to ban them from the platform. Companies typically don’t do well if they make a habit of suing their users, especially if those users are in a country where they’re specifically trying to say they don’t operate.

    If we were talking about a centralized exchange, they could lock your funds for KYC and refuse to return them if you can’t provide KYC, but with a decentralized protocol I think the legal risks are fairly low. As long as you don’t put them in a position where they have to make an example of you to maintain the ruse that they don’t operate in your country, they have no real reason to go after you.

    But as I said, I’m not a lawyer, and even if I were, there is a lot of unclear regulation out there.

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