DeFi bill introduced in Senate would hold major investors responsible for illegal use

Sen. Jack Reed (D-RI) and Sen. Mark Warner (D-VA) aimed to combat illicit financial activities such as money laundering and terrorist financing in Decentralized Finance (DeFi). submitted a new bill. bloomberg news Reported on July 19th.

The law penalizes violations of DeFi protocols and illegal transactions, and bans such activity. However, due to the inherent anonymity of DeFi users, the bill aims to hold those who control the platform accountable for violations.

If a DeFi platform does not have a clear manager or owner, the proposed bill would argue that liability would fall on those who invested heavily in the platform. The basket will include venture capital firms and other prominent investors who have invested over $25 million in the platform.

According to Reed,

“DeFi and cryptocurrency ATMs are some of the most unregulated technologies in need of stronger oversight and guardrails to prevent widespread money laundering and sanctions evasion.”

Many of the rules the bill seeks to impose on DeFi platforms overlap with requirements and obligations set on banks and other traditional financial institutions, such as requirements for maintaining customer records and reporting suspicious transactions to the Treasury Department. Similar. Additionally, the bill includes new rules for cryptocurrency ATM operators, which would require users to verify their identities.

push back

The proposed bill has received considerable criticism from industry insiders who perceive it as potentially stifling innovation. Others argue that DeFi cannot be regulated like traditional financial institutions and requires a new perspective.

DeFi Education Fund (DEF) Said:

“While we support effective measures to combat DeFi abuse, the bill submitted today essentially calls for ‘centralize, shut down, or exit the United States.’”

The organization added that there are better ways to tackle illicit financial activity in DeFi that are cheaper to enact and that don’t stifle innovation.

In recent months, DeFi platforms have been embroiled in controversy over allegations that they facilitate sanctions evasion and serve as a conduit for hackers to launder illicit profits.

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