When Lawmakers Play Catch-Up with DeFi

Well, here we are. It’s happened. The U.S. Senate, in its unwavering wisdom, has finally turned its sights on DeFi. For those of you huddled under a digital rock, decentralized finance (DeFi) is the unbridled, no-holds-barred frontier of finance. No banks. No borders. No Wall Street Wolf to get the better of your hard-earned crypto.

The Senate’s latest brainchild is the Crypto-Asset National Security Enhancement Act of 2023. A mouthful, right? Here’s the gist: they want DeFi to behave like a good ol’ bank. Shocking, right? You might as well ask your pet cat to start behaving like a well-trained golden retriever. Good luck with that.

Let’s dive into this bill, shall we? It’s got its knickers in a twist about “crypto-facilitated crime” and money laundering. Yeah, because only cryptocurrency is ever used for illicit purposes. Those dollar bills? As clean as a saint’s conscience.

Regulating the Unregulated – A Wild Goose Chase?

DeFi is built on permissionless blockchains. That’s like trying to police a city where every citizen is a potential mayor. And yet, our enlightened lawmakers believe they’ve found a loophole. They’re gunning for “anyone who ‘controls’ a DeFi protocol or makes available an application to use the protocol.”

Sounds like the old “guilty by association” adage is getting a 21st-century makeover, doesn’t it? But they’ve got a backup plan too. If no one ‘controls’ the protocol, anyone who’s dropped a cool $25 million in development will be responsible for fulfilling these bank-like obligations. The responsibility is on you, the brilliant minds behind these protocols. Nothing like a little bureaucratic pressure to stifle innovation, eh?

The Grand Vision – AML and Blockchain Bonanza

This controlling entity, whoever it might be, will have to play watchdog. The obligations? Collect customer info, maintain anti-money laundering programs, report suspicious activities, and blacklist sanctioned individuals. Oh, and did I mention the identity verification requirements for crypto kiosks? Because nothing screams “decentralization” like government-mandated ID checks at every turn.

It’s almost like they’re trying to fit a square peg into a round hole, or in this case, decentralized finance, into traditional banking protocols. It’s quite the sight.

Treasury’s New Powers – The Financial Panopticon

The bill also seeks to expand the Treasury Department’s authority to police alleged money launderers in non-traditional financial settings. Yes, you read that right. Not proven launderers, but alleged. I’m sure that won’t be misused.

The ‘crypto is a hub for all evil’ narrative gets another shot in the arm with this one. Because obviously, no traditional banker has ever been accused of money laundering. And we’re back to those dollar bills again, untouched by any whiff of scandal.

If you thought DeFi was just wild and free, think again. The U.S. Senate has arrived with its wagons of regulation, ready to build fences where none existed so much for the frontier of financial freedom. And so the struggle for the soul of cryptocurrency continues. Stay tuned; it’s going to be a bumpy ride.

Mario Estrella

Mario Estrella

Mario Estrella is a seasoned journalist and digital marketing professional at exxeo.report, specializing in technology-related news. With over two decades of experience in the field, he brings a rich history of working in diverse media outlets and advertising agencies. Notably, he has been instrumental in driving significant growth in online presence and readership in his past roles​. At exxeo.report, Mario leverages his extensive experience and deep understanding of the digital landscape to deliver engaging and insightful technology news to the audience.

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