1inch, a decentralized exchange aggregator, introduced a feature which pushes its users to verify whether they are US residents.
The feature requires users to sign an agreement with their cryptocurrency wallet stating that they are not in the United States.
While the signature doesn’t go directly onto the blockchain, 1inch could post it there if they wanted to, linking the wallet to the signature, according to Maarten Zuidhoorn, a developer at interface provider MyCrypto, on Stack Exchange.
“Others would […] be able to see who signed the message, by recovering the signer from the signature, and thus verify if your address signed the message,” said Zuidhoorn.
The new requirement highlights a dilemma for teams running centralized interfaces for decentralized protocols: While the tech they use on the backend is censorship resistant, their applications have to comply with local regulations.
US residents who have previously been using 1inch with a VPN pointing to an IP address in another country, may feel reluctant to continue doing so.
The move comes after US SEC head, Gary Gensler, said the regulatory agency will be taking an aggressive stance towards cryptocurrencies.
1inch’s restriction only exists on the interface level, so more technically adept US users could potentially interact with 1inch’s smart contracts directly, without needing to falsely sign terms and conditions agreement.
It’s going to be a battle to decentralize DeFi from smart contracts to interfaces. For now, law abiding US users will need to hold off signing 1inch’s terms and conditions agreement.