Polygon Labs lawyers have proposed transferring control over DeFi protocols to the US Treasury’s Office of Cybersecurity

DeFi protocols should be recognized as “critical infrastructure,” according to blockchain developer Polygon

30.01.2024 - 13:45

199

3 min

What’s new? Lawyers for blockchain developer Polygon have proposed that decentralized financial protocols (DeFi) be classified as “critical infrastructure” for US economic and national security, and that authority to oversee the sector be transferred to the federal cybersecurity agency.

Source: Twitter.com

What else is known? The 45-page document titled “A Conceptual Framework for Combating Illicit Finance Activity in Decentralized Finance” was prepared by Polygon Labs lawyers Rebecca Rettig and Katja Gilman, with input from Arktouros law firm co-founder Michael Mosier. It proposes that the US Department of the Treasury’s Office of Cybersecurity and Critical Infrastructure Protection (OCCIP) be designated as the sector’s regulator.

OCCIP is not an official financial regulator, but coordinates the work of the Treasury Department’s to improve the security and sustainability of critical infrastructure in the financial services sector and reduce operational risks, and works closely with financial firms, industry groups, and the government to share information about cybersecurity, threats, and vulnerabilities.

However, the paper notes that some DeFi protocols show strong signs of centralization, allowing them to be regulated as financial institutions under pre-existing rules, including the Bank Secrecy Act. For truly decentralized protocols, separate rules should be developed to protect the national and economic security of the United States.

CFTC issues guidance to address DeFi's risks to financial stability

Earlier, the US Treasury Department said that the booming market of decentralized finance threatens national security

US senators have previously proposed regulating DeFi protocols like banks. Requirements to comply with AML laws were proposed to be imputed to the organizations controlling the protocols.

Author: