Officials consider it necessary to introduce strict regulation of the industry

​US Treasury Department says national security is threatened by DeFi

07.04.2023 - 09:40

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4 min

What’s new? The US Treasury Department said that the booming market of decentralized cryptocurrencies threatens national security and needs increased oversight to combat money laundering. Among the threats, the agency singled out ransomware hackers and sanctioned states that use an opaque system of decentralized finance (DeFi) to conduct their activities. In the April 6 report, officials proposed mandating customer identification procedures for cryptocurrency platforms, non-compliance with which would result in enforcement action.

The full version of the report

What is DeFi?

What is DeFi?

DeFi, or Decentralized Finance, is a completely new stage in the development of the financial system

Read further

How does the Treasury Department propose to regulate DeFi services? According to the Treasury Department, DeFi services that do not comply with anti-money laundering and countering the financing of terrorism (AML/CFT) requirements pose the most significant threat because they allow criminals to use their services.

The agency believes that regardless of the degree of decentralization of such services, they are required to comply with the law and should be classified as financial institutions under the Bank Secrecy Act (BSA).

“Our assessment finds that illicit actors, including criminals, scammers, and North Korean cyber actors are using DeFi services in the process of laundering illicit funds,” Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian Nelson said in an agency press release.

Nelson added that private companies should use the results of the Treasury Department report to inform their risk mitigation strategies and take clear steps to prevent criminals from abusing DeFi services.

Officials recommended that the US authorities strengthen existing oversight of the industry and expand the authority of federal agencies, as well as require DeFi services to follow the same rules that work for banks and other financial institutions. In addition, the agency called for additional guidance for the private sector on compliance and to address gaps in the regulation of DeFi platforms.

Earlier, the Washington law firm Cooper & Kirk accused federal banking regulators of waging a “clandestine financial war” against cryptocurrencies. In their view, officials are using their power to pressure the industry and force it out of the financial system. The lawyers called on Congress to intervene and hold the agencies accountable.

What is DeFi?

What is DeFi?

DeFi, or Decentralized Finance, is a completely new stage in the development of the financial system

Read further

In late March, it became known that the US Securities and Exchange Commission (SEC) would receive a record $2,4 billion to regulate cryptocurrencies. The agency said it plans to hire 170 additional employees to fully oversee the financial markets.

According to popular American economist Nouriel Roubini, who predicted the 2008 global financial crisis, increased regulatory pressure on the industry will lead to the “crypto apocalypse.”

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