U.S. Senate prepares bill to regulate DeFi as banks
U.S. Senate prepares bill to regulate DeFi as banks
The U.S. Senate is considering a new bill to regulate the crypto industry, specifically the decentralized finance (DeFi) sector.
Lawmakers have made another attempt to establish control over the crypto industry. The new bill sets strict anti-money laundering requirements for DeFi protocols.
According to CoinDesk, the Crypto-Asset National Security Enhancement Act of 2023, which was jointly drafted by both parties, requires DeFi protocols to apply banking controls to their user base.
With such controls, the bill aims to combat fraud in the crypto industry by eliminating loopholes for money laundering, tax evasion, and sanctions.
DeFi protocols are more difficult to regulate because they are financial applications that allow any crypto wallet owner to trade cryptocurrency via smart contracts. This is their main difference from centralized networks like Coinbase.
The new bill addresses these control issues and establishes regulations to control DeFi protocols, or "protocol applications". This clarification is likely a reference to groups that create interfaces for cumbersome smart contracts.
According to a briefing on the bill, "If nobody controls a DeFi protocol, then, as a backstop, anyone who invests more than $25 million in developing the protocol will be responsible for these obligations." The law would require regulators to vet companies and service providers that collect client information, support anti-money laundering efforts, and report suspicious activity to the government.
As such, the bill significantly expands the Treasury Department's authority to combat money laundering in the crypto industry.
Also read: Introduction of the spot Bitcoin ETF will bring BTC inflows of $30 billion.
