• The US Treasury Department recently released a report on the risks of decentralized finance (DeFi), outlining the potential for money laundering, ransomware attacks, and other criminal activities.
• The document highlighted DeFi’s lack of proper sanctions and anti-money laundering controls, as well as its peer-to-peer nature that allows criminals to easily move funds between blockchains and cash out into fiat currency.
• The department also noted the popularity of cryptocurrency mixers like Tornado Cash with malicious actors, leading to its inclusion on their list of sanctioned entities last August.
Treasury Department Warns of National Security Threat from DeFi
The United States Treasury Department recently released a report warning of a national security threat from decentralized finance (DeFi). The document outlines potential risks from money laundering, ransomware attacks, and other criminal activities that can be enabled through DeFi’s lack of proper sanctions and anti-money laundering controls, as well as its peer-to-peer nature that allows criminals to easily move funds between blockchains and cash out into fiat currency.
Cryptocurrency Mixers Popular Among Criminals
The department also noted the popularity of cryptocurrency mixers like Tornado Cash with malicious actors. This led to its inclusion on their list of sanctioned entities last August. Cryptocurrency mixers are services that allow users to send funds anonymously by mixing them with other users‘ coins. They have become increasingly popular in recent years due to their ability to obscure the originator and destination addresses of transactions on public blockchains, making them attractive for those looking for increased privacy or anonymity when transferring funds.
Poor Cybersecurity Practices Pose Risk
The Treasury Department’s report highlights how poor cybersecurity practices within DeFi present a threat to crypto, consumers, and national security. This includes techniques such as swapping funds into less traceable cryptos or sending assets through cryptocurrency mixers in order to launder money without leaving an audit trail behind.
Heightened Regulation Needed
In response to these risks posed by DeFi services, the department calls for heightened regulation to ensure consumer protection and combat illicit activity in this space. This could include additional oversight by governments around the world or more stringent KYC/AML requirements for participating platforms and providers in order for them to remain compliant with applicable laws and regulations.
Conclusion
Overall, it is clear that there is significant potential risk presented by DeFi services if proper measures are not taken in order for them to remain compliant with applicable laws and regulations. With this in mind, it is essential that governments around the world take steps towards greater oversight in order protect consumers from harm caused by illicit activity within this space.