2023-07-20 00:10:11
© Reuters. US Senate introduces bill to regulate DeFi like traditional banks
CriptoFácil – The United States Senate plans to introduce new legislation in order to align the regulation of decentralized finance protocols (DeFi) with those of traditional banks. The bill called the National Crypto Asset Security Enhancement Act of 2023 proposes strict anti-money laundering (AML) requirements for DeFi protocols.
In addition, the legislation seeks to close the loopholes that allowed the evasion of AML measures and sanctions critical to US national security. The bill comes in response to growing concern about cryptocurrency-facilitated crime and the use of DeFi protocols.
DeFi protocols, financial applications that operate on permissionless blockchains, make it possible to trade digital currencies, loans and lending using smart contracts. Due to their decentralized nature, these have been more difficult to regulate than centralized cryptocurrency companies such as Coinbase (NASDAQ:).
Regulation in DeFi
With the new legislation, the intention is to impose obligations on “any person who ‘controls’ a DeFi protocol or makes an application available to use a DeFi protocol”.
This will possibly implicate entities like Labs, responsible for creating smart contracts for streamlined front ends for protocols, such as decentralized exchange Uniswap.
Furthermore, the bill states that “if no one controls a DeFi protocol, then – as a safeguard – anyone who invests more than $25 million in the development of the protocol will be liable for those obligations.”
This represents a further step towards ensuring that all DeFi protocols are subject to effective AML measures.
These obligations will include tracking and collecting customer data, keeping anti-money laundering programs up to date, notifying authorities of any suspicious activity, and preventing the use of their protocols by those who have been sanctioned.
Effective enforcement of these regulations can play a crucial role in ensuring security and transparency in DeFi operations, while promoting the responsible adoption of crypto assets.
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