The Treasury claims that decentralized cryptocurrency markets threaten US security

The U.S. Treasury Department stated on Thursday that the expanding decentralized cryptocurrency market poses a threat to US national security and requires increased regulation and enforcement against money laundering.

The warning paves the groundwork for stricter rules and punitive action by federal authorities. It appears in a new Treasury research examining the danger of the so-called DeFi markets.

DeFi systems allow cryptocurrency investors to conduct transactions with one another using internet software without a centralized middleman controlling the process. Regulators presently have limited knowledge about DeFi transactions due to the absence of traditional finance middlemen, such as banks.

The opaqueness of the market has been exploited by ransomware hackers, rogue governments, and other national security risks to transfer money across the globe undetected and facilitate the financing that is essential to their activities, according to a Treasury Department assessment.

Brian Nelson, Treasury’s undersecretary for terrorism and financial intelligence, claimed that illegal actors, including criminals, con artists, and North Korean cyber actors, use DeFi services to launder illegal monies. Addressing these hazards is necessary to reap the benefits that might come from using DeFi services.

According to the research, platforms that don’t put in place adequate screening measures run the possibility of facing enforcement action as the Treasury Department intends to bring the market under more government regulation.

The Treasury undersecretary advised the private sector to incorporate the department’s conclusions into their risk-reduction plans. To stop illegal actors from utilizing DeFi services, companies must take decisive action by laws designed to combat money laundering, financing of terrorism, and sanctions evasion, according to Mr. Nelson.

In one of its proposals, the Treasury Department suggested that the federal government strengthen its current market oversight and enforcement by forcing platforms to follow the same anti-money-laundering guidelines that banks and other financial institutions are required to do. According to the report, federal agencies also need to collaborate with other governments to set international standards and broaden their regulatory authority to fill any regulatory gaps that may exist in market monitoring.