The US Treasury has called on Congress to specify which participants in the decentralized finance (DeFi) ecosystem should be subject to anti money laundering (AML) obligations, in a report published this week. It was drafted as required by the GENIUS Act to explore innovative technologies that could be used to identify illicit financial transactions using digital assets, including stablecoins.
The report acknowledges that existing Bank Secrecy Act frameworks do not fully account for decentralized protocols, particularly where governance is distributed across user communities and the protocol itself is immutable. Treasury is asking Congress to draw clearer lines, and define new DeFi roles, especially aiming to impose AML obligations on more centralized protocols. It suggests that where a small group of users control governance tokens for a protocol, they should have have to comply.
On the cross border dimension, Treasury also recommends that Congress add a sixth special measure to Section 311 of the Patriot Act, which currently allows Treasury to cut off foreign financial institutions from the US correspondent banking system. The proposed extension would allow Treasury to prohibit or impose conditions on certain digital asset transmittals within the DeFi space that have no correspondent banking relationship.
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