A group of US Senators has resolved to work together to address the mounting concerns about decentralized finance (DeFi) and digital assets. Senator Jack Reeds sponsored the Crypto Asset National Security Enhancement Act of 2023, which was supported by three other senators on a bipartisan basis.
The proposed regulation intends to protect against cryptocurrency-related crimes and money laundering. These crimes have posed serious national security risks. To do this, the bill proposes subjecting DeFi protocols to the same standards that apply to traditional financial intermediaries that are regulated in the United States.
Individuals who “control” a DeFi platform must do know-your-customer (KYC) checks before providing customers access, according to the bill. These inspections will aid in the prevention of money laundering and will increase transparency.
Furthermore, DeFi operators will be required to report any suspicious activity occurring on their networks. This will help identify and address suspected illegal transactions. The measure requires DeFi platforms not to provide services to individuals or entities sanctioned by the United States government.
Individuals who invest more than $25 million in the creation of DeFi protocols without identifiable controllers will be held accountable for meeting regulatory standards.
Additional rules for Bitcoin ATMs are proposed in the law. Operators must validate and record consumer information, such as nationality or place of residence. This is done to improve security and avoid misuse.
NEWS: 🚀🔒 US Senators introduce bipartisan bill to enhance security in #DeFi & crypto ATMs!
— Walletor (@walletorapp) July 20, 2023
This measure was introduced as the United States tries to build a comprehensive regulatory framework for digital assets. However, opinions on the impact of these regulations differ. Some think that the legislation is required to legitimate the cryptocurrency business and protect users. Others, on the other hand, are concerned that tight regulations may stifle innovation in the DeFi sector.
Finding a balance between regulating and retaining DeFi’s decentralized nature will be critical as the measure is debated further. This smart legislation could pave the path for a more secure and reputable cryptocurrency business. Hopefully, this will help to bridge the gap between innovation and security.