PriyaPatelTLDR:
Lawmakers are being urged to adopt a nuanced approach to regulating decentralized finance (DeFi) projects, in a bid to avoid stifling innovation. A 45-page proposal released by three industry experts suggests that DeFi platforms should be treated more like internet infrastructure, rather than financial institutions subject to Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations. The proposal aims to create a framework for the US Treasury Department to regulate DeFi, with different divisions handling different classifications of DeFi services.
The collapse of FTX and revelations of illicit financing using crypto have led lawmakers to consider new regulatory measures. However, the proposal argues that using existing laws like the Bank Secrecy Act may not be appropriate, as it could treat DeFi services as financial institutions rather than autonomous software.
The authors of the proposal believe that DeFi protocols should be considered critical infrastructure, essential to the functioning of the economy. However, they acknowledge that persuading treasury officials to accept this view may be a challenge, as the priority is often zero tolerance for illicit finance. The proposal suggests a mix of new legislation and existing rulemaking powers to implement its framework.
Key points:
- A 45-page proposal has been released to urge lawmakers to adopt a nuanced approach to regulating decentralized finance (DeFi) projects
- DeFi platforms should be treated more like internet infrastructure, rather than financial institutions subject to AML and KYC regulations
- The proposal aims to create a framework for the US Treasury Department to regulate DeFi, with different divisions handling different classifications of DeFi services
- The authors of the proposal suggest that DeFi protocols should be considered critical infrastructure, essential to the functioning of the economy
- A mix of new legislation and existing rulemaking powers is suggested to implement the framework
