Crypto Geoblocking Costs Americans $5 Billion in Airdrops

Recent studies have revealed that American cryptocurrency holders may have lost up to $5 billion in potential airdrop income due to stringent geoblocking measures. These measures, implemented by cryptocurrency firms to avoid penalties from regulatory bodies such as the Securities and Exchange Commission (SEC), have inadvertently caused significant economic consequences for both individuals and the government.

Geoblocking has led to IP restrictions, impacting tens of thousands of potential participants. According to Dragonfly’s research, which analyzed 12 cryptocurrency airdrops including Uniswap and 1inch, 11 of these airdrops imposed restrictions on US IP addresses. This affected between 920,000 to 5.2 million active users, accounting for 5–10% of the 18.4 to 52.3 million cryptocurrency holders in the US impacted by geoblocking policies in 2024.

The total value of the airdrops in Dragonfly’s sample amounted to around $7.16 billion. Approximately 1.9 million people globally claimed airdrops, with an average value of about $4,600 per eligible wallet address. Based on these figures, Dragonfly estimates that Americans lost between $1.84 billion and $2.64 billion from 2020 to 2024 due to the 11 airdrops that blocked US users. CoinGecko, which conducted a similar analysis with a larger sample size of 21 airdrops, estimates the losses could range from $3.49 billion to $5.02 billion.

The exclusion of US IP addresses from participating in crypto airdrops is a measure to avoid penalties from regulatory bodies like the SEC. This caution is driven by the potential legal challenges ahead, especially under the new acting SEC Chair. Blocking and losing a portion of US users is considered a safer option than facing costly litigation, as seen in cases with Ripple, Kraken, or coinbase.

The lost federal personal income tax revenue from geoblocked airdrops, based on CoinGecko’s sample from 2020 to 2024, is estimated to range from $418 million to $1.1 billion. The estimated lost state tax revenue ranges from $107 million to $284 million. This represents an estimated tax revenue loss of $525 million to $1.38 billion. The relocation of cryptocurrency operations overseas has also significantly reduced US tax revenue. For instance, companies like Tether establishing headquarters in El Salvador may have cost the US approximately $1.3 billion in federal corporate taxes and $316 million in state taxes.

In conclusion, the stringent geoblocking measures in the cryptocurrency sector have led to significant economic implications for both investors and the government. With potential losses up to $5 billion in airdrops and a near $3 billion tax revenue shortfall, the urgency for legislative clarity in the crypto space becomes even more apparent. The situation emphasizes the need for both innovation in finance and regulatory oversight that fosters growth without alienating domestic participants.