Validator can only decide transactions for its own block. This is the same as a miner currently.
- Some US based miners are already not including Tornado Cash transactions in their block
- These transactions are included in the blocks mined by the other miners
- Base layer censorship is not likely, because there have sanctioned Bitcoin and Ethereum addresses since 2018
- Getting the required 2/3 validators on the board might be difficult, becaused there is a huge backslash from the community against this and this could lead to another TheDAO hard fork like event and just having your validators slashed by the users / DoS etc.
The base layer neutrality make senses. Web browsers don’t censor the DNS addresses you can access either.
How is Ethereum going to comply with looming regulations in the cryptocurrency industry with proof-of-stake when regulators and enforcement agencies such as the OFAC could instruct validators to not mine or process transactions that have come from Ethereum mixers like Tornado.cash or sanctioned addresses and stay as a permissionless network at the same time?
If they do comply and enough validators start censoring these transactions, then it no longer is a permissionless network and just censors transactions like any other permissioned network does. If not enough validators censor or comply with these regulations, the funds in those validators will be slashed and may cause a cascade of lost funds and will also allow the processing of transactions from sanctioned addresses. i.e non-compliance and angering the regulators.
The energy problem is most definitely solved. But from a regulatory point of view, it appears that the Merge will introduce another can of worms and will make Ethereum eventually a more permissioned network with proof-of-stake.