Crypto Industry’s Sanctions Woes on Full Display in MetaMask’s Venezuela Hiccup

MetaMask and Infura raised Crypto Twitter’s ire after accidentally blocking some users from its service to comply with new U.S. sanctions.

Mar 4, 2022 at 3:12 a.m. UTC
Updated Mar 4, 2022 at 3:23 a.m. UTC

Danny is CoinDesk's deputy business editor. He owns BTC, ETH and SOL.

Crypto observers cried foul Thursday when reports surfaced on Reddit that MetaMask, the gateway for many to the world of Ethereum, was made inaccessible to users in Venezuela.

The truth of the matter, however, was that Infura, the infrastructure service also owned by Ethereum conglomerate ConsenSys, had imposed new geoblocks Thursday but applied them too broadly, according to a series of tweets.

The mistake had been rectified, Infura said, but not before critics levied claims that the episode revealed a point of failure in what is widely billed as the “uncensorable” internet.

“Infura closely monitors changes to U.S. sanctions programs announced by the Office of Foreign Assets Control and narrowly tailors its internal controls to comply with the law,” a ConsenSys spokesperson told CoinDesk via email. “Currently, those regions are Iran, North Korea, Cuba, Syria, and the Crimea, Donetsk, and Luhansk regions of Ukraine.”

Infura’s blockade of these regions comes as regulators ramp up intense scrutiny of the crypto industry’s compliance with sanctions imposed by U.S. and other national authorities against Russian entities. Regulators and lawmakers like U.S. Senator Elizabeth Warren and German Finance Minister Christian Lindner have said they’re concerned crypto could be a tool used to undermine sanctions. Industry participants such as exchanges have said they will block sanctioned individuals, but for the most part they have not blocked entire nations outright.

MetaMask accesses the Ethereum blockchain through Infura by design. Unless altered by users, MetaMask’s default endpoints make it subject to Infura’s geographic no-go zones.

Crypto Twitter was reminded of that reality Thursday after Infura mistakenly threw too wide a dragnet. Rumors swirled over a complete blockade to Venezuela; commentators alleged, incorrectly, that MetaMask had been barred in a country where crypto booms and where the U.S. has imposed long-standing but not absolute sanctions.

“In changing some configurations as a result of the new sanctions directives from the United States and other jurisdictions, we mistakenly configured the settings more broadly than they needed to be,” Infura said Thursday in a tweet.

Infra acknowledged the uproar, apologized for its “oversight” and said service had been restored to “inadvertently impacted regions,” though it did not name Venezuela. MetaMask parroted the apology in its own tweet explaining it relies on Infura for access to the blockchain.

“MetaMask is still a decentralized tool,” Kieran Daniels, CEO of crypto startup SmartDeFi told CoinDesk in a Twitter message. “It’s just their default connections aren’t.”

Users are able to set their own endpoints by going into app settings, MetaMask said in a tweet. It shared a guide on how to do so.

Sanctions season

Coming amid a global debate on crypto and sanctions, the episode highlighted the seemingly conflicting realities of running uncensorable financial services through centralized rails.

Companies like Infura provide crucial developer and infrastructure services to an array of Ethereum-based projects. But it’s also a U.S. company subject to federal law. When Infura implements restrictions as it did on Thursday, the ripple effects are felt far and wide.

“As a centralized entity, funded by investors like JPMorgan, infrastructure providers like Infura are subject to regulatory concerns,” Josh Neuroth, CEO of decentralized cloud services company Ankr said in a statement. “This over-reliance on centralized service providers goes against everything that Web 3 stands for and is meant to be – and represents a central point of failure that shouldn't exist in the first place.”

Ankr, Inc. is itself a U.S. company. When asked if this meant Ankr must also follow sanctions directives from the U.S. Treasury Department, Neuroth said yes – “but the team is working as quickly as possible toward transitioning to a protocol that exists in the network and isn't run by a company, but a DAO."

The confusing chain of events on Thursday was only made more so by a repeatedly updated “troubleshooting” page on MetaMask’s website. When CoinDesk first reported on this story that page was headlined “Why MetaMask and Infura cannot serve certain areas,” fueling speculation that MetaMask was itself implementing blocks.

A later update narrowed the headline to Infura.

“By default, MetaMask accesses the blockchain via Infura, which is unavailable in certain jurisdictions due to legal compliance,” the page read late Thursday. “When you attempt to use MetaMask in one of those regions,” users will receive an error message.

A chorus of commentators on Twitter insisted that the whole ordeal was proof that MetaMask was not quite as decentralized as they thought.

Left unsaid was the fact that Infura – and therefore MetaMask – have long followed OFAC sanctions guidance.

Crypto users in Iran, North Korea, Cuba and Syria were excluded well before those in parts of Ukraine.

The Festival for the Decentralized World
Thursday - Sunday, June 9-12, 2022
Austin, Texas
Save a Seat Now

DISCLOSURE

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.

Danny is CoinDesk's deputy business editor. He owns BTC, ETH and SOL.

Danny is CoinDesk's deputy business editor. He owns BTC, ETH and SOL.

Trending

1
Grayscale Investments to List Its First ETF in Europe

The Grayscale Future of Finance exchange-traded fund will list on the London Stock Exchange, Deutsche Börse and Borsa Italiana.

The Grayscale Future of Finance exchange-traded fund will list on the London Stock Exchange, Deutsche Börse and Borsa Italiana.

2
Indian Central Bank Says Cryptos Could Lead to "Dollarization" of Economy: Report

RBI officials said cryptocurrencies could undermine the central bank's capacity to regulate flow of money.

RBI officials said cryptocurrencies could undermine the central bank's capacity to regulate flow of money.

3
Nigeria’s SEC Affirms All Digital Assets Are Securities in New Rulebook

Rules look to clarify crypto’s role in the economy by providing a regulatory framework.

Rules look to clarify crypto’s role in the economy by providing a regulatory framework.

4
First Mover Asia: Singapore’s Regulators Will Be Eyeing Local Crypto Companies After Terra Collapse; Bitcoin Rebounds

Terraform Labs, the Singapore-registered company behind the Terra protocol, doesn’t have a permanent office in the city-state; most major cryptos spent Sunday in the green.

Terraform Labs, the Singapore-registered company behind the Terra protocol, doesn’t have a permanent office in the city-state; most major cryptos spent Sunday in the green.