The US Commodity Futures Trading Commission (CFTC) has expressed the urgent need for federal authorities to develop measures to identify users engaged in decentralised finance (DeFi). The regulator has expressed concern about the anonymity and elimination of intermediaries offered by DeFi projects, emphasising that such factors could lead to violations of anti-money laundering and counter-terrorist financing regulations. The lack of accountability in decentralised networks means there are no safeguards for users, which was the basis of the CFTC's concerns.
The regulator recognises the potential privacy breaches in imposing identification requirements on DeFi systems. However, the CFTC believes that government interference with user anonymity may be justified if it helps protect against loss of funds and fraud. It is noted that addressing these issues requires a more thorough examination of the regulatory framework to determine how the laws may apply to the activities of DeFi projects.
The CFTC calls for standards to be set for identity verification at all levels of the DeFi ecosystem, suggesting that rules be implemented for those who provide identity information. This includes collecting sufficient customer information. Christy Goldsmith Romero, CFTC Commissioner, notes that a balance must be struck between privacy and accountability.
The CFTC is calling for standards to be set for identity verification at all levels of the DeFi ecosystem, proposing to implement rules for those who provide identity information. This includes collecting sufficient information about customers. Christy Goldsmith Romero, CFTC Commissioner, notes that a balance must be struck between privacy and accountability.
The CFTC Commissioner emphasises that the lack of accountability in the DeFi sector is a major problem that creates significant risks. The regulator will contribute to the field of digital assets by investigating the issues to avoid unintended consequences in this rapidly evolving sector. The CFTC has previously paid whistleblowers in the cryptosphere $16 million in 2023 and brought lawsuits against several companies in the industry. In November, the regulator warned of possible prosecutions for all cryptocurrency exchanges that fail to comply with Know Your Customer (KYC) procedures.
