Decentralized cryptocurrencies, according to the Treasury, pose a threat to national security. Regarding the risk assessment for illicit funding in 2023, the US Treasury Department has issued a press statement. After thorough research of the decentralized finance industry, the published report discusses how cybercriminals, thieves, con artists, and ransomware perpetrators use DeFi services to transport and launder their illegally obtained money.
This is why cryptocurrencies are a concern to national security. Buttressing this, Brian E. Nelson, the Treasury Secretary responsible for countering terrorism and financial intelligence, revealed that the US Treasury Department’s assessment has found that illicit actors, including criminals, con artists, and North Korean cyber actors, are using DeFi services to launder illicit funds.
According to them, the factor that enables bad actors to exploit the crypto space is the non-compliance of DeFi services with AML/CFT and sanctions obligations. “DeFi services engaged in covert activity under the Bank Secrecy Act have AML/CFT obligations regardless of whether the services claim that they currently are or plan to be decentralized,” the press statement reads.
Contributing to the frequent and easy attack on DeFi is the weak or non-existent AML/CFT controls for DeFi services in some jurisdictions, alongside poor cybersecurity by DeFi services, which enable the theft of funds.
Shedding more light on their stance, the Treasury noted that DeFi enables consumers to transact without the need for a middleman and according to them, this creates a high chance of money laundering. The paper also emphasizes ways to conduct assessments and steps to mitigate the hazards related to DeFi. These steps are “strengthening the U.S. AML/CFT regulatory supervision, considering additional guidance for the private sector on DeFi services’ AML/CFT obligations and assessing enhancement to address any AML/CFT regulatory gaps related to DeFi services.”
The research emphasizes the need for increased regulatory oversight and suggests additional regulations for DeFi services be considered by the US government.
