Geofencing: The Extreme Compliance Strategy for Crypto Founders Facing U.S. Regulation
As regulatory uncertainty around cryptocurrency continues to grow in the United States, crypto founders are increasingly considering geofencing as an “extreme solution” to stay compliant. Geofencing involves blocking users in specific regions or jurisdictions by setting up virtual boundaries, and it’s becoming a fallback strategy for some companies to manage compliance risks in the face of mounting regulatory pressures.
Crypto Founders and Geofencing: What’s Driving the Shift?
In a Sept. 30 post on X (formerly Twitter), Jake Chervinsky, chief legal officer at Variant Fund, explained that many crypto founders are exploring geofencing as a means to comply with U.S. regulations. Chervinsky shared a comprehensive guide on the process, pointing out that while geofencing is an extreme option, it offers a potential solution for crypto firms that struggle to meet compliance requirements such as Know Your Customer (KYC) and disclosure obligations.
In simple terms, geofencing creates a virtual “fence” that blocks users from specific geographic locations. In this case, U.S. users could be excluded from accessing a crypto product if a company cannot comply with U.S. regulatory requirements.
A Global Issue for the Crypto Industry
The issue of regulatory tightening is not unique to the United States. In 2023, 17 jurisdictions representing 70% of global crypto exposure imposed stricter regulations on the industry, according to data from TRM Labs. This global trend is forcing companies to find ways to remain compliant without shutting down entirely in high-regulation markets.
One recent example is the DeFi protocol Sky (formerly Maker), which faced backlash after blocking VPN access for its Spark Protocol to prevent U.S. users from circumventing geofences. Unfortunately, this move also blocked all IP addresses associated with VPNs, regardless of their actual location. Similarly, the world’s largest crypto exchange, Binance, has been using geofencing to display messages like, “Binance.com is unavailable in your country or region,” when users with U.S. IP addresses are trying to connect to the platform.
More Crypto Firms Join the Geofencing Trend
Chervinsky’s guide outlines best practices for geofencing, recommending the use of IP addresses, GPS data, and other advanced geolocation tools to identify and block U.S. users. To enhance these efforts, multiple layers of blocking can be applied, such as IP blocking, VPN monitoring, and user attestations.
Other protocols have also adopted geofencing. In April 2023, Eigenlayer, an Ethereum-based staking protocol, restricted users from over 30 countries — including the United States, Canada, China, and Russia — from accessing its airdrop. The Solana-based decentralized exchange Orca took similar action, blocking U.S. users from trading on its web platform.
Is Geofencing the Future of Crypto Compliance?
While geofencing offers crypto firms a way to avoid compliance risks in markets with stringent regulations, it is not without its drawbacks. The complexity and cost associated with implementing geofencing make it a challenging and expensive solution for many companies.
In a September blog post, GeoComply, a provider of compliance solutions, highlighted how tailored geofences using advanced geolocation data allow crypto firms to expand into new markets while maintaining compliance. The company emphasized the benefits of precision geofencing, which can enable firms to protect themselves from regulatory risks in certain jurisdictions.
A Costly but Necessary Measure?
Nevertheless, Jake Chervinsky concluded that geofencing is an “extreme and costly measure” to ensure compliance, particularly in the United States. It can also hinder the growth of decentralized projects, which aim to be accessible to everyone, regardless of location.
For now, it appears that geofencing could become a more widely used strategy as crypto firms navigate the ever-evolving regulatory landscape. However, the long-term feasibility and impact of this compliance solution remain to be seen, especially as global regulations continue to tighten
I am Toby Rothschild, Co-Founder of Spearmint and author at Coinography, and a strategist focused on advancing Web3 innovation, digital ecosystems, and the future of decentralized technology. I combine product thinking, creative leadership, and deep interest in emerging trends to help shape how individuals and organizations interact with the next generation of digital systems.
My work centers on understanding how blockchain, AI, and digital identity are reshaping global industries. At Spearmint, I help lead the direction of initiatives that bring clarity, structure, and meaningful user experiences to complex technological environments. I focus on bridging vision with execution, ensuring that innovation remains practical, scalable, and aligned with long-term growth.
As an author at Coinography, I create insights that translate fast-moving Web3 developments into clear, useful narratives. I explore topics such as decentralized governance, digital identity, creator economies, token models, protocol design, and the shifting cultural patterns around emerging technology. My aim is to make digital transformation more understandable and approachable for a wider audience.
I believe that Web3 is not only a technological shift but a cultural and creative one. Strong ideas, thoughtful communication, and human-centered design will shape which technologies thrive and how communities evolve around them. My writing and research reflect this belief, focusing on clarity, relevance, and long-term perspective.
Professional Links Website: https://coinography.com LinkedIn: https://www.linkedin.com/in/tobyrothschild/
