Title: New DeFi Bill Has “Unworkable Obligations,” Says Crypto Council for Innovation
The Crypto Council for Innovation (CCI) has criticized a new bill introduced in the US Senate that aims to address anti-money laundering (AML) and illicit finance activities in the decentralized finance (DeFi) space. The CCI claims that the proposed bill provides no workable framework to combat illicit finance in DeFi and goes against the proper approach.
Proposed Obligations and Shortcomings:
The bill, introduced by Senators Jack Reed, Mike Rounds, Mark Warner, and Mitt Romney, suggests applying AML obligations to DeFi protocols and crypto ATMs. However, the CCI argues that the bill’s proposals are vague and place arbitrary legal obligations on individuals who have no means to influence protocols once they are deployed.
Specifically, the CCI highlights the obligations placed on “Digital Asset Protocol Backers” and “Digital Asset Transaction Facilitators.” The CCI believes that these proposals are not only strange but also lack clear definitions. Additionally, the council points out that the bill offers no practical guidance on how decentralized protocols can comply with Bank Secrecy Act (BSA) reporting requirements. The bill fails to address the technical complexity and does not provide solutions in this regard.
The CCI’s Position:
While acknowledging that illicit finance is a legitimate national security concern, the CCI emphasizes the need to leverage the transparency and programmability inherent in blockchain systems to derive appropriate compliance measures unique to the crypto industry. However, the CCI claims the bill goes in the opposite direction by imposing unworkable obligations without accounting for the unique attributes of blockchain-backed systems.
The council stresses the importance of collaboration with industry experts and regulators in the development of a technologically sound approach to curbing illicit finance in DeFi. Their goal is to draft a comprehensive framework for the appropriate regulation of the sector. The CCI aims to ensure that policymakers have accurate information about the operations of DeFi protocols and crypto ATMs to strike a balance between establishing safeguards and fostering innovation in the US.
The CCI’s criticism highlights the concerns regarding the proposed bill on AML obligations in the DeFi space. While the bill is still in its early stages, the CCI hopes that dialogue and collaboration will guide its revisions. As the industry evolves, it is crucial to develop regulatory frameworks that address illicit finance while nurturing innovation in the crypto sector.