In new report, the department lays foundation for regulation, enforcement of ‘DeFi’ markets.
WASHINGTON,
USA —The burgeoning decentralized cryptocurrency market threatens U.S. national
security and needs greater oversight and enforcement against money-laundering,
the U.S. Treasury Department said on Thursday.
The
warning, in a new Treasury report assessing the risk of the so-called DeFi
markets, lays the foundation for tougher regulations and punitive action by
federal agencies.
DeFi
platforms enable crypto investors to transact with each other through software
running online, without a central intermediary overseeing transactions. Without
the intermediaries of traditional finance such as banks, regulators currently
have little insight into DeFi transactions.
Ransomware
hackers, rogue states and other national security threats have seized upon the
market’s opaqueness to move money around the world without detection,
facilitating the financing critical to their operations, the Treasury
Department report said.
“Illicit
actors, including criminals, scammers, and North Korean cyber actors are using
DeFi services in the process of laundering illicit funds,” said Brian Nelson,
Treasury’s undersecretary for terrorism and financial intelligence. “Capturing
the potential benefits associated with DeFi services requires addressing these
risks.”
The
report sketches out how the Treasury Department plans to bring the market under
greater federal oversight, suggesting that platforms that fail to establish
sufficient vetting policies risk enforcement action.
The
private sector should use the department’s findings to inform their own risk
mitigation strategies, the Treasury undersecretary said. Companies need to take
clear steps, in line with regulations to counter money laundering, terror
financing and sanctions-evasion, to prevent illicit actors from abusing DeFi
services, Mr. Nelson said.
Among
its recommendations, the Treasury Department said the federal government needs
to bolster its existing supervision and enforcement of the market by requiring
platforms to adhere to the same anti-money-laundering rules that banks and
other financial institutions must follow. Federal agencies also need to expand
their regulatory powers to cover potential gaps in oversight of the markets, it
said, and work with other governments to establish international standards.
***Ian
Talley at Ian.Talley@wsj.com
https://www.wsj.com/articles/decentralized-cryptocurrency-markets-threaten-u-s-national-security-treasury-says-d9dd324f
