DeFi: US Treasury wants to regulate sector for ‘threat to national security’
CriptoFácil – The war against exchanges and pro-cryptocurrency banks is not over, but the United States has already chosen a new “enemy”: decentralized finance (DeFi).
According to a statement released by the Treasury Department this Thursday (6), DeFi protocols have become the new threat. According to the US government, the sector is the epicenter of North Korean hackers, ransomware attackers, thieves and scammers.
The Treasury also claimed that hackers use DeFi protocols to transfer and launder money from their illegal activities. As such, officials said they need to regulate the industry and bring it within US law.
DeFi: the new threat
As data from a new Treasury risk assessment of DeFi shows, the sector also lacks regulation. Additionally, criminals are taking advantage of loopholes in the regulation and enforcement of anti-money laundering (AML) and terrorist financing laws in the US.
Because of these loopholes, hackers are able to use the protocols to steal and launder funds. After all, most DeFi protocols do not have identity verification processes, such as the famous KYC (Know Your Customer).
In short, the 39-page report concludes that DeFi offers the most significant potential for engaging in illegal financial activities. The document also reinforces the need to extend KYC rules and combat money laundering to all protocols.
Treasury Under Secretary for Terrorism and Financial Intelligence Brian Nelson was quoted as saying:
“Our assessment concludes that illicit actors, including North Korean criminals, scammers and cybercriminals, for example, are using DeFi services in the process of laundering illicit funds.”
Complies with US rules
The report then recommends that the US government tighten its regulatory oversight and consider providing more guidance to the “private sector” on compliance checks for DeFi services. This will result in a decrease in the risk that these protocols offer. The document’s conclusions call for certain revisions to the legislation, as well as suggesting that the government extend the rules to more protocols.
The report comes at a time when the Joe Biden administration is proposing a more comprehensive regulatory framework for cryptocurrencies and DeFi and other forms of payment facilitated by the use of blockchain technology.
In September, the government issued a directive to pursue investigations and enforcement measures against illegal conduct – asking the Securities and Exchange Commission (SEC) and other regulators to do the same.
Not long ago, the SEC began to crack down on crypto platforms, especially exchanges. The regulator even ended the activities of some companies. Additionally, Coinbase (NASDAQ:) and Kraken had to cancel products that were not approved by US regulations.
By CriptoFacil