- Is DeFi a tool for criminals?
- The use of DeFi for evading sanctions will be banned
- ATMs should also ensure identity verification
- Society opposes the bill
On July 19, a group of United States senators introduced the Crypto-Asset National Security Enhancement and Enforcement (CANSEE) Act. According to this bill, DeFi services would need to follow the same compliance rules as financial institutions such as banks and centralized crypto exchanges.
Is DeFi a tool for criminals?
The bill presented by Jack Reed (the Democratic Party, Rhode Island), is supposed to crack down on “criminals, drug traffickers, and hostile state actors such as North Korea,” who have used decentralized finance (DeFi) for illegal purposes.
In accordance with the new regulations rules, DeFi services would have to follow anti-money laundering (AML) regulations and U.S. sanctions requirements.
The use of DeFi for evading sanctions will be banned
DeFi designates services based on smart contracts that do not require any financial intermediaries and exist on-chain. Examples include the exchange UniSwap and lending protocol Aave.
If the new legislation is adopted, the use of DeFi services for evading sanctions will be banned. Those controlling a DeFi project would have to pay fines if their service is used to evade U.S. economic sanctions. If there is no single controlling entity, the responsibility would lie with those who have invested over 25 million US dollars in the project.
According to the official statement, the bill extends the U.S. Treasury Department’s “authority to crack down on illicit financial activity that may occur outside the banking sector.” The full text of the bill has not been published on Congress’ website so far.
ATMs should also ensure identity verification
It is stated in the bill’s description, that the new legislation would also apply to crypto ATMs where people can buy cryptocurrencies using cash or debit cards. ATM operators would be required to introduce identity verification for all transaction participants.
Society opposes the bill
Supporters of the bill include Mike Rounds (the Republican Party, South Dakota), Mitt Romney (the Republican Party, Utah), and Mark Warner (the Democratic Party, Virginia), who claim that the new legislation will serve to protect the nation’s security.
“I remain deeply concerned that criminals and rogue states continue to use crypto to launder money, evade sanctions, and conceal illicit activity,” Mark Warner commented. He also said that those crypto market players who do not violate any rules would be able to continue exploring crypto’s potential.
The bill’s description also refers to the fentanyl crisis, suggesting that DeFi was used to support trafficking the drug into the United States. This statement reflects the concerns raised by Elizabeth Warren (the Democratic Party, Massachusetts).
The crypto policy non-profit Coin Center has filed a lawsuit against the U.S. Treasury Department over the Tornado Cash ban. According to the crypto advocacy organization, the ban is not only unfair towards the DeFi project but also could set a dangerous precedent.
