Do DeFi Protocols Need Sanctions Screening?

The direct answer on DeFi and sanctions screening obligations.

TL;DR

TL;DR: Yes. OFAC designated Tornado Cash smart contracts — protocol-level interaction is not exempt. DeFi protocols and the agents that use them carry screening obligations.

The precedent

OFAC sanctioned Tornado Cash addresses, including smart contracts. That action established that interacting with designated contracts or addresses is prohibited — even in code.

The nuance

Enforcement practice and technical feasibility vary by protocol design (non-custodial vs custodial, frontend vs contract). The direction is clear: screen what you can, document what you cannot.

The agent angle

An agent calling a protocol is you transacting. The screen belongs in the agent path — before the contract call, not after.