OFAC-Compliant MEV Relays vs Permissionless/Censorship-Resistant Relays: Regulatory Compliance in Block Building

OFAC-Compliant Relays like Flashbots Protect and BloXroute's Regulated service excel at providing legal certainty and enterprise-grade reliability for protocols operating in regulated jurisdictions. By filtering transactions from sanctioned addresses (e.g., Tornado Cash), they mitigate regulatory risk for validators and builders. This model has achieved significant adoption, with compliant relays often dominating the relay market share on Ethereum, processing a majority of blocks to ensure network stability and predictable block production.

Permissionless/Censorship-Resistant Relays such as Ultra Sound Relay, Agnostic Relay, and Titan Builder take a different approach by enforcing strict neutrality. They do not filter transactions based on origin, upholding the core blockchain principle of censorship resistance. This results in a trade-off: while they protect network integrity and user sovereignty, entities using them may face increased regulatory scrutiny. Their adoption is a critical metric for decentralization, with advocates tracking the "censorship resistance ratio" of the Ethereum chain.

The key trade-off: If your priority is regulatory compliance, risk mitigation, and seamless integration with institutional validators (e.g., Coinbase, Kraken), choose an OFAC-compliant relay. If you prioritize maximizing network neutrality, upholding credibly neutral base-layer guarantees, and serving a globally permissionless user base, choose a censorship-resistant relay. The decision fundamentally aligns with your protocol's legal stance and philosophical commitment to decentralization.

OFAC-Compliant Relays (e.g., Flashbots Protect, BloXroute's 'Regulated' service) excel at providing legal certainty for protocols operating in regulated jurisdictions like the U.S. or EU. By filtering transactions from sanctioned addresses, they shield builders, validators, and the end protocol from potential regulatory enforcement actions. For example, after the OFAC sanctions on Tornado Cash, these relays became the default choice for major staking pools like Lido and Coinbase, which together command over 30% of Ethereum's validator set, demonstrating their dominance in compliance-focused environments.

Permissionless/Censorship-Resistant Relays (e.g., Ultra Sound Relay, Agnostic Relay, rsync) take a different approach by committing to transaction inclusion based solely on fee priority, adhering to Ethereum's credibly neutral ethos. This strategy results in a critical trade-off: while they maximize network liveness and resistance to centralized control—evidenced by their role in keeping censorship below 33% during periods of high regulatory pressure—they expose associated entities to potential legal scrutiny and complicate relationships with traditional financial partners.

The key trade-off is between legal risk and network principles. If your priority is mitigating regulatory exposure for your protocol, team, and investors—especially if you are a publicly-traded company or serving institutional clients—choose an OFAC-Compliant Relay. If you prioritize maximizing Ethereum's censorship resistance and credibly neutrality as a core protocol value, and are structured to accept the associated legal ambiguity, choose a Permissionless Relay. For many, a hybrid strategy, routing transactions through both relay types, provides a practical balance between these competing imperatives.