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Solana-based DEX Orca bans US users from trading in its platform

Orca becomes the latest decentralized exchange (DEX) to restrict U.S. residents from interacting with its web platform, according to a notice on its official website.

The Solana-based DEX noted that the U.S. would be joining the list of banned countries by March 31, giving affected users over a week to prepare for the changes. Orca’s announcement appears to be linked to a rising regulatory crackdown on the digital currency industry in the United States.

“Orca will be adding the United States to the regions and countries which are restricted from trading on effective March 31, 2023. This will not impact the ability of U.S. users to directly interact with Orca’s smart contracts or SDK, nor will it impact their ability to provide liquidity through,” the announcement read.

Orca was launched in February 2021, and immediately became one of the most popular Solana DEXs and automated market maker (AMM) platforms. In February alone, Orca recorded transaction volumes exceeding $600 million, with nearly $50 million on total volume locked (TVL) on the Solana network.

It appears that U.S. users will still be allowed to interact with Orca’s smart contracts if they do so directly. Only the website functionalities will be blocked for U.S. residents, with a range of options available for U.S. residents to interact directly with the DEX.

One method that U.S. users have been doing to bypass the restriction is by using tools like Truffle or Hardhat, or the Jupiter platform. Another alternative to interact directly with Orca’s smart contract has been via the use of virtual private networks (VPN) to hide their IP address, allowing them to evade geographical restrictions.

Other DEXs have moved to preclude U.S. residents from using their platforms, citing regulatory concerns with Binance DEX leading the way in 2019, but offering users the option of VPNs to bypass restrictions. DEX aggregator joined the growing list with a ban on U.S. residents with a strict warning for citizens not to attempt bypassing restrictions.

“You must not use any software or networking techniques, including the use of a Virtual Private Network (VPN) to modify your internet protocol address or otherwise circumvent or attempt to circumvent this prohibition,” the warning read.

A case against DEXs

Generally, decentralized exchanges are typically not subject to registration by the U.S. Securities and Exchange Commission (SEC) because of the absence of custody or order books. However, some experts believe that registration for DEXs with the Commission is required as they satisfy the requirements for registration with the Commission.

“The focus is not on the label you put on something or the technology you’re using. The focus is on the function, and what the platform is doing. Whether it’s decentralized or not, whether it’s on a smart contract or not, what matters is it’s an exchange,” Robert Cohen, former head of the SEC Cyber Unit, said in 2018.

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