Why dYdX Blocks Certain Countries Even Though It Calls Itself a Decentralized Exchange

Key Takeaways

• dYdX claims decentralization but runs a centralized frontend that can block users by geography.
• The platform blocks the United States, United Kingdom, Canada, Iran, Cuba, North Korea, Syria, Myanmar, Crimea, Donetsk, Luhansk and a growing list of sanctioned territories.
• Blocked wallets are put into a "close‑only" mode that lets users unwind positions but prevents new trades or deposits.
• Compliance is driven by U.S. sanctions, AML/CTF laws, and OFAC’s restricted‑person lists.
• If you live in a prohibited region, you can still exit existing positions, export your seed phrase, and consider alternative fully decentralized protocols.

What dYdX Says It Is

When you hear dYdX is a crypto derivatives exchange that markets itself as decentralized, the first image that comes to mind is a permission‑less platform where anyone can trade perpetual contracts without a middleman.

The platform was launched in 2017 by Antonio Juliano a former Coinbase engineer and Princeton CS graduate. It now offers more than 160 perpetual markets, from Bitcoin and Ethereum to newer assets like Solana, Polygon and Chainlink.

In theory, the core matching engine runs on smart contracts, which means no single entity can halt trades. In practice, the user‑facing frontends - the web app at dydx.trade and the mobile apps - are owned and operated by dYdX Operations Services Ltd. (DOS). That distinction is the root of the country‑blocking puzzle.

Which Countries Are Blocked?

dYdX’s public terms list a large set of prohibited jurisdictions. The list is not static; it expands as new sanctions are announced. As of October2025, the most common blocked regions are:

• United States
• United Kingdom
• Canada
• Iran
• Cuba
• North Korea
• Syria
• Myanmar (Burma)
• Crimea, Donetsk, Luhansk (Russian‑controlled areas)
• Iraq, Libya, Mali, Democratic Republic of Congo, Côte d’Ivoire, Nicaragua, Somalia, Sudan, Yemen, Zimbabwe

Notice that some large markets - China, Russia, South Korea, Japan, Vietnam - remain accessible, showing that the platform’s compliance strategy is selective rather than universally conservative.

How dYdX Enforces the Blocks

When a user’s IP address, wallet metadata or KYC data signals a prohibited location, DOS flags the wallet. The user then sees a bright red banner that says the account is under compliance review. From that moment, the interface switches to a "close‑only" mode:

1. All new orders are automatically set to reduce‑only, meaning they can only shrink or close an existing position.
2. Deposits and transfers are disabled - you can’t add more collateral.
3. You can still withdraw the funds that are already on‑chain, but only after closing all positions.
4. If the wallet stays in close‑only mode for seven days, it turns to Blocked status, which hides trading history and sub‑accounts.

The only way out is to export the Secret Recovery Phrase, move the assets to a personal wallet, and stop using the dYdX frontend altogether.

Why the Platform Needs to Follow the Rules

The enforcement isn’t a hobby project; it’s driven by real legal obligations. The United States’ Office of Foreign Assets Control (OFAC) maintains a list of sanctioned individuals, entities and regions. Violating OFAC rules can result in civil penalties of up to $1million per transaction and criminal penalties that include imprisonment.

In addition to OFAC, the platform must adhere to the Bank Secrecy Act, AML (Anti‑Money‑Laundering) and CTF (Counter‑Terrorism Financing) requirements. Those laws require a "Know Your Customer" (KYC) approach that filters out users from high‑risk jurisdictions.

Because dYdX has corporate entities - dYdX Trading Inc. in New York and dYdX Foundation in Zug, Switzerland - it cannot claim the legal immunity that a purely permission‑less protocol enjoys. Those entities need to be able to show regulators that they are not facilitating prohibited activity.

Comparison: dYdX vs a Purely Decentralized Exchange

The table shows why dYdX can enforce borders while a protocol like Uniswap cannot - there is simply no centralized point of control to receive a compliance request.

What Users in Blocked Regions Can Do

If you discover that your wallet is flagged, here’s a practical checklist:

1. Check the status banner. The interface will tell you whether you’re in close‑only or fully blocked mode.
2. Close all open positions. Use reduce‑only orders; the platform will refuse any increase‑size orders.
3. Withdraw remaining collateral. Once positions are zero, hit the withdraw button and move funds to a personal wallet.
4. Export your Secret Recovery Phrase. This is the only way to regain full control of the assets.
5. Consider alternative platforms. Fully decentralized exchanges like Uniswap or dYdX v4 (future) (if it ever becomes fully permission‑less) do not enforce geographic blocks.

While the process may feel restrictive, it protects you from accidentally violating sanctions that could lead to frozen assets or legal trouble.

Broader Implications for the DeFi Space

The dYdX case is a micro‑cosm of a larger debate. On one side, developers want to keep the original DeFi promise: open, borderless finance. On the other side, regulators are tightening the net around high‑value derivatives, AML, and sanctions compliance.

Hybrid platforms like dYdX illustrate a pragmatic path: they keep the core trading logic on‑chain (preserving liquidity and innovation) while adding a compliant front‑end layer that can be shut down if required. The trade‑off is that users have to accept some central control - the very thing that pure DeFi seeks to eliminate.

As more jurisdictions publish clear guidance on crypto derivatives, we may see two trends:

• New protocols that deliberately avoid any centralized UI, forcing users to interact through self‑hosted wallets only.
• Existing platforms building “decentralized modules” that can be swapped out if regulators demand changes.

Until that future arrives, dYdX’s dYdX restricted countries policy will remain a reality for many traders.