Author: Aiying; Source: AiYing Compliance
In recent years, global regulatory agencies and international organizations such as the Financial Action Task Force (FATF) have Regulators are paying more and more attention to the field of decentralized finance (DeFi). Their nervousness mainly stems from concerns about the growing momentum of DeFi, fearing that it will eventually become uncontrollable. Unlike the traditional financial system, DeFi lacks centralized management entities, such as banks or other financial institutions, which would be responsible for executing and complying with regulatory requirements in the traditional system. The decentralized nature of DeFi makes it difficult for traditional regulatory methods to be effective, which creates a series of new challenges for regulators.
In the United States, the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) have begun to take action against DeFi projects,in September last year The U.S. Commodity Futures Trading Commission (CFTC) issued simultaneous announcements against three companies—Opyn, Inc., ZeroEx, Inc., and Deridex, Inc.—for operating in the field of decentralized finance (DeFi) without registering as required. Order to file and resolve charges. The companies were charged with failing to register as a trade execution facility or designated contract market, failing to register as a futures commission merchant, and failing to implement a customer identification program under the Bank Secrecy Act. Additionally, they have been accused of illegally offering leveraged and margined retail commodity trading in digital assets. The CFTC has ordered the companies to pay civil penalties and cease further violations.
At the same time, the U.S. Department of the Treasury released a report on the risks of DeFi financial crime, and was also charged with money laundering and sanctions evasion on behalf of North Korea. Sanctions were imposed on DeFi mixer Tornado Cash for facilitating the move – an action that has been taken by the courts. Despite legal challenges from the industry, the verdict has so far been upheld. Organizations such as the Financial Action Task Force have also sounded the alarm about the growth of cross-chain crime, which relies on components of the DeFi space such as decentralized exchanges (DEX) and bridges.
At the international level, policymakers are also seeking to coordinate the efforts of all parties to regulate DeFi together. The Financial Action Task Force (FATF) has called for , it is said that anti-money laundering tactics should be used to deal with the risks of DeFi, and the International Organization of Securities Supervisors (IOSCO) has formulated a list of policy recommendations for countries so that everyone can have the same copy.
These recommendations cover six key areas:
(1) Understanding DeFi arrangements and structures,
< p style="text-align: left;">(2) Achieve common standards for regulatory outcomes,
(3) Identify and manage key risks,
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(4) Clear, accurate and comprehensive information disclosure,
(5) Enforcement of applicable laws ,
(6) Cross-border cooperation.
These DeFi policy recommendations are for 2023 Supplementing the Cryptocurrency and Digital Assets (CDA) Market Policy Recommendations released in November, both sets of recommendations were developed in line with the IOSCO Crypto-Assets Roadmap 2022/2023 and are detailed in an umbrella statement published alongside the DeFi Final Report Illustrating the interoperability between the two sets of recommendations.
These evolving trends will make 2024 a critical year for the DeFi space and may have a significant impact on DeFi will have a decisive impact on the future development of Defi.
The strengthening of Defi law enforcement
This year, the U.S. regulatory leaders will most likely start to take DeFi seriously. They have already begun to take action against the founders of some DeFi projects and the teams behind them, and have also fined several large sums. Just now In June last year, the CFTC achieved a major victory in its lawsuit against Ooki DAO. The DAO was sentenced to pay a fine and accept a trading and registration ban for illegally operating a trading platform and failing to register as a futures commission merchant. The court ruled that Ooki DAO was regarded as a An entity that can be held legally responsible and therefore accountable for its violations. This case is a precedent that DAO structures may not be able to escape legal liability, and serves as a warning to similar entities that try to circumvent legal supervision. This will happen more often this year, and there may be fines in the millions for the first time.
Recently, the U.S. Securities and Exchange Commission (SEC) has taken drastic measures against DeFi and brought DEX into the regulatory scope of U.S. broker-dealers, which means that centralized exchanges ( DEXs) must follow the rules of traditional brokers.
Meanwhile, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) took action against platforms like Tornado Cash for allegedly helping North Korea launder money. OFAC will take more actions this year, with the goal of cutting off North Korea’s use of DeFi to launder money.
However, using law enforcement alone to solve the problem is a bit clumsy and cannot last long. Regulators and international organizations also know this, so they will spend more time this year studying how to update the regulatory framework to better adapt to DeFi.
For example, the U.S. Commodity Futures Trading Commission (CFTC) announced at the beginning of the year that they would study how to apply anti-money laundering and anti-terrorist financing regulations to every corner of DeFi. . Michael Mosier, the former acting director of FinCEN, also proposed a new idea on how to implement anti-money laundering tactics for decentralized financial venues such as DeFi.
Decision makers and regulators in the European Union, the United Arab Emirates, Hong Kong and other places will also be busy this year to see whether their new regulations can be applied to DeFi. In general, the regulatory atmosphere in DeFi will be tighter this year, and everyone must be careful not to step on the wrong side of things.
The balance of supervision
As regulatory agencies With the increasing attention of decentralized finance (DeFi), innovators in the DeFi field are facing a key question: How to ensure that DeFi can maintain its decentralized characteristics and promote real innovation, while being compatible with regulatory requirements?
If the DeFi community can show regulators that its activities can operate in compliance with the rules, then 2024 may be a turning point for DeFi to win regulatory trust. . On the other hand, if DeFi’s compatibility with regulation is not ideal, regulators may take more stringent measures to restrict activities in the DeFi market in 2024, which may not be conducive to continued innovation in the field.
In this context, DeFi participants must begin to pay attention to utilizing blockchain analysis tools and other compliance technologies to ensure that their operations comply with regulatory requirements. The exploration and implementation of solutions will become critical to maintaining the vitality and legitimacy of DeFi innovation.
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Kikyo
Cointelegraph