According to a recent study by the US Treasury Department, decentralised financial (DeFi) transactions, including cryptocurrencies and other digital currencies, must adhere to anti-money laundering and sanctions regulations.
This report was authorised by the Biden government that concludes that there are a number of threats associated with DeFi technology, that do not have a clear description but contain self-operated transactions between multiple individuals on the basis of the same blockchain technology that powers cryptocurrencies.
As per Treasury, these risks comprise exploitation by cybercriminals using malware, robbers, fraudsters, and Democratic People's Republic of Korea (DPRK) digital criminal bodies.
The US Treasury release was issued on Thursday, April 6, 2023, at a time when the US and other nations are debating how to manage cryptocurrencies and digital assets. It suggests stronger regulations for the tech and informs businesses that they must comply with the existing regulations regarding money laundering and terrorism funding. The report also discovered that many organisations and their customers do not follow these regulations.
Brian Nelson, the Treasury undersecretary for Terrorism and Financial Intelligence, states "Addressing these concerns is necessary to realise the positive advantages connected to DeFi solutions."
On the other hand, the report says "the private business should implement the results of this analysis to acknowledge their internal risk reduction strategies and to adopt explicit actions, in compliance with AML and CFT standards and penalties requirements, to prevent fraudsters from misusing DeFi services."
On March 31, 2023, DeFi demanded the biggest industry leaders comply with the Know Your Customer (KYC) regulations. Read more about it. |
The Biden government is examining a wider regulatory regime for cryptocurrencies and other kinds of transactions performed with blockchain-based. A report analysis was also released, which suggests certain modifications to the regulations. The Securities and Exchange Commission and other authorities were urged to "relentlessly seek inquiries and legal measures against illicit behaviour" by the government in September.
Whereas the wider regulation of virtual funds continues to be a contentious legitimate and regulatory issue. Alex Zerden, a former Treasury official who counsels cryptocurrency companies on their illicit-finance risks, said that Treasury has been trying to resolve some queries about the new tech with guidelines and its report released on Thursday.
However, Zerden states "No matter what the operations are termed, Treasury continues to designate them as those that must adhere to AML/CFT regulations.”
He also emails saying "Emerging technologies can raise fresh issues. Yet, Treasury continues to emphasise the significance of public-private partnerships and the necessity to engage atypical entities who may have Bank Secrecy Act obligations."