Centralized Elements 'Frequently Persist' in DeFi and Should Be Regulated: FATF
Centralized Elements 'Frequently Persist' in DeFi and Should Be Regulated: FATF
A ban as a last resort
FATF wants countries to close the gap by requiring, or at least encouraging, DeFi projects to build anti-money-laundering controls straight into their smart contracts or interfaces, from sanctions screening to proof-of-KYC checks before certain functions run.
For projects that really are leaderless, it steers regulators toward the choke points around them: stablecoin issuers that can freeze tokens, exchanges that handle fiat on- and off-ramps, and front-end operators. And where a platform refuses to cooperate, the report says, a jurisdiction can as a last resort ban it from operating in its territory. Banks and exchanges, for their part, are told to run due diligence on any DeFi platform they touch, or stop dealing with it.
North Korea's DeFi haul
The report leans heavily on how criminals already work the sector. It singles out North Korea, whose state-linked hackers, it says, were behind two April attacks that together drained more than $570 million: the $285 million exploit of Solana perpetuals exchange Drift Protocol, pulled off in just 12 minutes, and a $292 million hack of KelpDAO.
Together they made up some 76% of the year's crypto-hacking losses. The report also points to ransomware crews, professional laundering networks, and investor frauds as heavy users of DeFi's mixers, bridges, and swaps.
Jury Finds Tornado Cash Developer Roman Storm Guilty of Money Transmitting Charge
That crackdown is already underway elsewhere. U.S. prosecutors this year secured prison terms for the two co-founders of Bitcoin mixer Samourai Wallet and a conviction against Tornado Cash developer Roman Storm, cases built on the same idea FATF presses here: that the people who build and run the code can be treated as regulated money businesses.
DeFi's total value locked reached $86.6 billion this year, up about 85% since 2023, with the top dozen protocols holding more than 60% of it, per the report, which calls for regulators to implement the FATF rulebook rather than leaving a gap that could enable illicit finance at scale.
This article has been published in decrypt.co via Yahoo News.
Centralized Elements 'Frequently Persist' in DeFi and Should Be Regulated: FATF
Nearly every country has yet to apply the rules, the watchdog said, warning of outright bans for platforms that don’t comply.
finance.yahoo.com
