OFAC Defi Regulation Glossary Part 1
Core terms for how OFAC sanctions reach decentralized finance protocols and the agents that use them.
TL;DR
TL;DR: DeFi, or decentralized finance, runs financial services on smart contracts without intermediaries. OFAC sanctions still apply to DeFi activity, and agents interacting with DeFi protocols must screen counterparty addresses.
What DeFi regulation means
DeFi, short for decentralized finance, refers to lending, trading, and payments built on smart contracts rather than banks or brokers. The absence of a central company does not remove legal obligations. OFAC has made clear that sanctions apply to DeFi, including the protocols, smart contracts, and wallet addresses that facilitate prohibited transactions. A protocol with no legal entity still faces enforcement when it processes activity with blocked parties.
Why it matters for agent payments
An AI agent that supplies liquidity, swaps tokens, or routes payments through a DeFi protocol is transacting with wallet addresses, so address screening is the practical control. If a counterparty address is listed, the interaction is prohibited under strict liability. The sanctionsai.dev API screens the destination wallet against 947 OFAC-listed addresses and returns clean or flagged in one HTTP call under 100 ms, letting the agent block the interaction before any value moves.
Terms covered in Part 1
- DeFi: decentralized finance run on smart contracts.
- Smart contract: self-executing code that governs a protocol.
- Protocol: the set of contracts that provide a DeFi service.