Ethereum OFAC compliance dips to 45% post-Merge upgrade
The historic Merge upgrade from Sept. 2022 — which marked Ethereum’s transition from proof-of-work (PoW) to proof-of-stake (PoS) — resulted in the overall decline in compliance with standards laid down by the Office of Foreign Assets Control (OFAC).
Ethereum blocks adhering to OFAC compliance censor certain transactions, which has a negative impact on the neutrality of the Ethereum ecosystem. In early August 2022, OFAC sanctioned Tornado Cash and several Ether (ETH) addresses associated with it due to its ability to mask and anonymize transactions.
Before the Merge upgrade, Ethereum’s OFAC compliance increased exponentially as entities such as crypto exchanges opted to run censoring MEV-Boost relays on their validators. The list of top censorship offenders is populated by popular platforms such as Binance, Celsius Network, Bitfinex, Ledger Live, Huobi (HTX) and Coinbase, according to MEV Watch data.
However, the overall OFAC compliance of Ethereum blocks has declined significantly. In November 2022, 78% of the total Ethereum blocks complied with OFAC regulations. As of today, Sept. 27, Ethereum’s OFAC compliance dropped to 30%, recording an overall reduction of 57%.
Countering OFAC compliance requires operators to use relays that do not censor according to OFAC compliance requirements. There are seven major MEV-boost relays that are most commonly used: Flashbots, BloXroute Max Profit, BloXroute Ethical, BloXroute Regulated, BlockNative, Manifold and Eden. However, not all systems adhere to OFAC compliance, according to MEV Watch:
“Of the 7 available major relays only 3 do not censor according to OFAC compliance requirements.”
It is also important to note that not all blocks built by OFAC-compliant relays are censoring; however, all blocks built by OFAC-compliant relays will censor when non-compliant transactions are broadcast to the network.
While OFAC regulations primarily target United States-based organizations, validators outside the U.S. must consider running non-censoring relays for the benefit of the network.
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Amid Ethereum’s reduced OFAC compliance, Grayscale made the decision to abandon all the rights to PoW Ethereum tokens (ETHPoW). However, the decision was attributed to a lack of liquidity in the market. According to an official announcement:
“As such, it is not possible to exercise the rights to acquire and sell the ETHPoW tokens, and on behalf of the record date shareholders, Grayscale is abandoning the rights to these assets.”
On the other hand, some cryptocurrency investment firms like ETC Group have attempted to launch dedicated EthereumPoW exchange-traded products (ETPs).
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A reference to China being an “enemy” of the UK was removed from key evidence for a collapsed spy trial in 2023 as it “did not reflect government policy” under the Conservatives at the time, according to the national security adviser.
In the letter published by parliament’s Joint Committee on National Security Strategy earlier on Friday, National Security Adviser (NSA) Jonathan Powell said Counter Terror Police and the Crown Prosecution Service were aware of the change made by Deputy National Security Adviser (DSNA) Matt Collins.
This would mean the CPS knew the “enemy” reference had been removed before charging the two suspects, according to Mr Powell.
In another letter published on Friday, the director of public prosecutions (DPP) Stephen Parkinson told the committee that it took DSNA Mr Collins more than a year to confirm to prosecutors he would not say China posed a threat to UK national security in court.
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The DPP said a High Court judge ruled in June last year that an “enemy” under law is a state which “presently poses an active threat to the UK’s national security”, prompting the CPS to ask the DNSA whether China fulfilled that criteria.
He added prosecutors did not believe there would be “any difficulty in obtaining evidence” from Mr Collins that China was a national security threat, but added: “This was a sticking point that could not be overcome.”
Mr Parkinson added that the DNSA’s “unwillingness” to describe China as an active or current threat was “fatal to the case” because Christopher Cash and Christopher Berry’s defence teams would have been entitled to call him as a witness.
The DPP added: “This factor is compounded by the fact that drafts of the first witness statement, reviewed by us in July 2025, showed that references to China being an ‘enemy’ or ‘possible enemy’ had been deleted.
“Those drafts would probably have been disclosable to the defence.”
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What do we know about the China spy case?
A final draft of Mr Collins’ statement was sent to then-prime minister Rishi Sunak in December 2023, Mr Powell’s letter said.
“Drafts of a statement provided to DNSA included the term ‘enemy’ but he removed this term from the final draft as it did not reflect government policy,” the letter reads.
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It comes amid a political row over the collapse of the prosecution of Christopher Berry and Christopher Cash last month, who were accused of conducting espionage for China.
Both individuals vehemently deny the claims.
Because the CPS was pursuing charges under the Official Secrets Act 1911, prosecutors would have had to show the defendants were acting for an “enemy”.
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China spy row: Witness statements explained
DPP Mr Parkinson has come under pressure to provide a fuller explanation for the abandonment of the case.
He has blamed insufficient evidence being provided by the government that Beijing represented a threat to the UK at the time of the alleged offences.
The Conservatives have accused Sir Keir Starmer of letting the case collapse, but Labour has said there was nothing more it could have done.
The current government has insisted ministers did not intervene in the case or attempt to make representations to ensure the strength of evidence, for fear of interfering with the course of justice.
Sir Keir Starmer met Chinese premier Xi Jingping in November 2024. Pic: PA
The DNSA and DPP will face questions from the parliamentary committee on Monday afternoon.
The current attorney general, Lord Hermer, and the chancellor of the duchy of Lancaster, Darren Jones, will be questioned on Wednesday.
The PM’s spokesman reiterated the government’s position that “what is relevant in a criminal case of this nature is the government’s position at the time of the alleged offences”.
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