key takeaways
- Coin Center has responded to the US Treasury’s “Illicit DeFi Finance Risk Assessment” report.
- The cryptocurrency advocacy group criticized the Treasury for assuming that all DeFi protocols were not compliant with AML regulations.
- However, he praised the report for acknowledging that DeFi posed very little risk of illicit activity compared to the traditional banking sector.
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The US Treasury believes that DeFi protocols do not de facto comply with AML regulations. Coin Center issued a report challenging that notion.
Response to Treasury claims
The US Department of the Treasury issued an “Illicit DeFi Funding Risk Assessment” report yesterday. The crypto industry is now giving its answer.
Today, the cryptocurrency advocacy organization Coin Center released an analysis of the Treasury report. The article, titled “Treasury’s New DeFi Risk Assessment Builds on Inadequate Frameworks and Makes Potentially Unconstitutional Recommendations,” states that Treasury’s stance tends to assume that all decentralized finance protocols fail to comply with anti-money regulations. money laundering.
According to Coin Center, the biggest problem with the Treasury report is that it assumes that all DeFi projects do not comply with the Bank Secrecy Act, regardless of whether the protocol is actually required to comply. Coin Center argued that the government, instead of lumping all DeFi protocols together, should start differentiating projects by the services they provide. For example, a protocol that allows the trading of commodity derivatives and a protocol that allows the transmission of currency must comply with different AML regulations.
Coin Center also criticized the report for repeatedly downgrading the notion of “non-custodial” protocols, which would exempt DeFi developers from the need to comply with BSA regulations. The report “leaves the reader with the suspicion that these individuals have found some insidiously clever loophole instead of simply going off and exercising constitutional rights to publish innovative research and software,” the advocacy group stated.
However, Coin Center praised the report for acknowledging that the bulk of illicit finance is not done through the use of DeFi protocols, but through the traditional banking sector. For example, non-compliant international centralized crypto exchanges such as FTX have been shown to pose much higher money laundering risks.
Disclosure: At the time of writing, the author of this article owned BTC, ETH, and various other crypto assets.
