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Is it just me or is the Treasury Department firing warning shots at DeFi?

A cartoon image of a Bitcoin, superimposed on a background of shapes
Who could have guessed? | Illustration: Micha Huigen / The Verge

All kinds of unwanted users — ransomware gangs, thieves, scammers, and North Korea — are merrily transacting in decentralized finance and even laundering funds, according to a new report from the Treasury Department. That’s because DeFi doesn’t comply with anti-money laundering and anti-terrorism finance laws.

Poor compliance with anti-money laundering as well as poor cybersecurity puts DeFi users at risk of theft and fraud, the Treasury says.

In the US, the Bank Secrecy Act — and some other regulations — mean that financial institutions have to help the government detect money laundering. In this paper, the Treasury notes that a DeFi service might well be a financial institution under the BSA, even if it’s decentralized, and will have…

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