The U.S. Treasury has launched a public consultation to integrate digital identity checks in DeFi smart contracts under the GENIUS Act aimed at combating illegal financial activities.
Consultation on Digital ID Implementation in DeFi
The U.S. Treasury has initiated a public consultation under the GENIUS Act to address illicit financial activities in DeFi. This includes exploring digital identity verification, involving API interfaces for automatic KYC/AML checks and the use of biometrics. The public consultation will remain open until October 17, 2025.
Impact on DeFi Compliance Strategies
The proposal signifies a shift towards integrating modern technology in regulatory frameworks and could reshape DeFi compliance norms affecting stablecoin systems and risking $6.6 trillion in bank deposits. As of now, no immediate official statements from major DeFi protocols have been observed, but the community remains alert.
Potential Changes in Market Dynamics
Previous U.S. regulatory efforts on digital finance compliance have influenced DeFi protocols, causing fluctuations in total value locked (TVL). Current market conditions indicate that upcoming regulatory changes could redefine compliance costs, affecting liquidity and stability within DeFi ecosystems.
The U.S. Treasury's consultations on digital identity are set to significantly influence DeFi compliance and financial system risks. The outcomes of these discussions are anticipated to result in new regulations in the digital finance sector.
