In theory, regulated exchanges could be required to burn/freeze/hold/return assets that interact with the blacklisted entities. This would abstract all essence

In theory, regulated exchanges could be required to burn/freeze/hold/return assets that interact with the blacklisted entities. This would abstract all essence of decentralized finance and challenge the principles behind web3 finance, but it is theoretically an option. Another, and probably better avenue, is for financial institutions and exchanges to implement crypto compliance and tracing tools. Then, using such tools to holistically understand customer's risk. If sanctioned coins represent a very small % of the total flow as well as a one-time occurrence, it's likely the customer was the victim of a dust attack and hence presents little sanction avoidance risk.