Regulators trying to blacklist crypto wallets are in a race they are mathematically guaranteed to lose.
March 26, 2026
Original Paper
Enforcement Speeds In DeFi: Limits to a Race Against Time
SSRN · 6348398
The Takeaway
Analysis of all 173 OFAC-sanctioned Ethereum wallets reveals that 71% of funds escape before they can be frozen because wallet creation is free and instant while legal enforcement is bandwidth-constrained. The study proves that even if investigation time were reduced to zero, the architectural asymmetry of decentralized finance makes full enforcement impossible.
From the abstract
Retrospective blacklist enforcement fails structurally in permissionless systems: adversaries create wallets offline at negligible cost while enforcement designates addresses on-chain at finite bandwidth, an asymmetry no improvement in investigation speed can resolve. We document this using the complete population of 173 OFAC-sanctioned Ethereum wallets. Across approximately $3.3 billion in total wallet value, we document two structural enforcement failures. First, approximately 71% of value, eq