“Geofencing” Could Block U.S. Users From Crypto Services

• Jake Chervinsky provides a complete guide to geofencing, a method of blocking users in certain regions.
• The lawyer states that many crypto companies consider geofencing as an extreme solution to regulatory uncertainties.
• Multiple blocking methods include IP blocking, attestations, and VPN monitoring.

Jake Chervinsky, Variant Fund’s chief legal officer, says many crypto founders are considering geofencing to comply with increasing scrutiny from U.S. regulators.

Geofencing blocks users in certain regions from accessing crypto products using virtual fences. In an X post on September 30, Chervinsky called geofencing an extreme solution to the regulatory uncertainty in the U.S. He explained, “Geofencing means stopping people in certain locations from accessing a product by creating a virtual “fence” around it.”

Read also: Hong Kong’s Crypto Hub Plans Hit by Regulatory Challenges

Chervinsky expanded on his points, offering a complete guide to geofencing. He argued that geofencing is a drastic measure that could ensure regulatory compliance. Calling it a fallback option for when all else fails, he said geofencing could ease companies’ regulatory burdens.

Further, Chervinsky stated that a crypto company might choose geofencing if faced with overwhelming regulatory measures such as Know Your Customer (KYC). For instance, the company could block users from countries with strict regulations, like the US, instead of implementing complex regulatory tasks.

Chervinsky’s guide outlines effective geofencing methods. He suggests using IP addresses and GPS data to identify users to block. Additionally, he recommended multiple blocking methods, including IP blocking, attestations, and VPN monitoring.

The lawyer also advised using international infrastructure and minimizing the use of US-based hardware and personnel. He stressed that companies should use non-US servers and cloud services. While noting the advantages of geofencing, Chervinsky acknowledged that the strategy is “an extreme and costly measure.”

In a September 18 blog post, GeoComply, a compliance solutions provider, highlighted the benefits of tailored geofences in cryptocurrency market expansion. The platform stated that geofencing allows crypto companies to enter new markets while adhering to regulatory compliance.