New Legislation in the United States Senate Would Treat DeFi Like a Bank
With a new measure that would impose rigorous anti-money-laundering (AML) standards on DeFi protocols, the U.S. Senate is ready to take another stab at regulating the crypto business.
According to a summary of the bill seen by CoinDesk, the bipartisan Crypto-Asset National Security Enhancement Act of 2023 would mandate that DeFi protocols put banking-style regulations on its user base.
The training document said that the bill’s goal is to “fight the rise of crypto-facilitated crime and close off ways to avoid money laundering and sanctions that are important to our national security.”
Any user with a cryptocurrency wallet and the appropriate DeFi protocol application may borrow, lend, and trade cryptocurrencies via smart contracts. Since they run on permissionless blockchains, they are more difficult to govern than centralized businesses like Coinbase.
By imposing obligations on “anyone who ‘controls’ a DeFi protocol or makes available an application to use the protocol,” the bill hopes to sidestep these problems, presumably in reference to organisations like Uniswap Labs that create user-friendly frontends for protocols’ otherwise complicated smart contracts.
These governing bodies would be responsible for customer due diligence, data collection, anti-money laundering program upkeep, government reporting, and blocking access to their protocol for those on the government’s blacklist.
The measure would mandate that users of cryptocurrency kiosks provide proof of identification.
It would also give the Treasury Department more power to go after suspected money launderers in unregulated markets like cryptocurrency.