U.S. Treasury Targets DeFi, Calls for Stricter Rules

The U.S. Treasury Department has called for stricter regulations of decentralized finance (DeFi) due to potential risks associated with it. According to a recent report from the department, DeFi projects could expose consumers and other investors to “significant volatility and financial losses” if appropriate safeguards are not put in place.

The report also noted that DeFi “could potentially offer benefits in terms of financial inclusion, security, and efficiency” but was quick to point out that there are various risks associated with these projects.

The report went on to say that the department is taking steps to ensure proper regulation of DeFi projects, including increased scrutiny of virtual currency transactions. Additionally, they stated that they have launched a new initiative to provide guidance on how companies can comply with existing anti-money laundering (AML) and countering the financing of terrorism (CFT) regulations.

Speaking on the subject, Treasury Secretary Steven Mnuchin said “DeFi projects have significant potential benefits for consumers and investors, but also come with significant risks. We want to make sure those risks are appropriately addressed so that those who choose to participate can do so safely and securely”

The department has also encouraged other agencies at both the federal and state level to take action as well in order to ensure proper oversight of DeFi projects.

The announcement from the Treasury Department comes at a time when DeFi is becoming increasingly popular amongst investors looking for alternative investments that do not rely on traditional banking systems.

It remains too seen how this affects DeFi projects going forward, but it seems safe to say that stricter regulation will be necessary in order for them to continue operating in an increasingly regulated environment.