New Defi Act contains impossible obligations

• The Crypto Council for Innovation says that the new AML law does not offer a practical framework for illegal financing in Defi.
• According to the crypto alliance, the proposals of the draft law "in the opposite direction" go to what should be the right approach.
• The CCI says that legal obligations are "arbitrarily imposed" in the draft law.

A draft law introduced in the US Senate to combat money laundering and other illegal financial activities in the field of decentralized finances (Defi) "does not offer a practical framework," said the Crypto Council for Innovation.

The draft law was brought in by the senators Jack Reed (Rhode Island), Mike Rounds (South Dakota), Mark Warner (Virginia) and Mitt Romney (Utah). His suggestions include the application of AML obligations to defi protocols and crypto money machines.

Coinjournal today reported on the proposals of the new Defi Act.

legal obligations are arbitrarily imposed on people

The CCI, which represents a group of industry leaders and actors who are committed to the further development of the crypto industry, has published a opinion with indication that the proposals of the draft laws, including the proposed requirements for supporters and supporters of Defi, do not offer a "practical frame".

2/ tl; Dr: The proposal does not offer a practical frame to actually combat illegal financing in these sectors. https://t.co/cibbbyuikk

- cryptorate for innovation (@crypto_council) 19. July 2023

Although he realizes that illegal financing is a legitimate national security risk, the council accuses the authors of the draft law that they go in the opposite direction in relation to the defect sector.

" illegal financing is a legitimate national security risk, and although its scope in cryptocurrencies compared to tradfi is low, it is a good idea to use the transparency and programming of blockchain systems in order to derive suitable compliance measures that only apply to crypto drives in the opposite direction. arbitrarily legal obligations that, after their introduction, have no actual way to influence the protocols, and do not take into account the unique properties of blockchain-supported systems , said the council.

One of the problems to which the CCI indicates in the bill is the obligation to impose the alleged "supporters of the Digital Asset Protocol" imposed. According to the bill, this would be anyone who has a governance token of a defi protocol worth more than $ 25 million or has invested $ 25 million or more in the development of the protocol.

It also subjects obligations for so -called "Digital Asset Transaction Facilitator", which are about every person that is assumed that they have control of the protocol or offers access to an application that enables transactions on the crypto protocol mentioned.

The Council says that these suggestions are not only "strange", but also led to ambiguities with regard to the definition of "intermediaries". In addition, the group says that the draft law contains "unenforceable obligations" and offer "no actual guidelines".

" The proposal does not offer actual guidelines on technical options for decentralized protocols to meet the BSA reporting requirements. It is not possible to collect personal identification data from such protocols, and the draft law does not respond to this technical complexity, nor does it offer solutions on how this restriction can be met ." the Crypto Council found.

As part of their contribution on the subject of defi regulation, the CCI said that they work with industry experts and regulatory authorities in the USA and elsewhere in order to design a framework for the appropriate regulation of the sector.

" We advise you with industry experts and regulatory authorities in the USA and other leading jurisdiction in order to develop a technologically sound approach to the impression of illegal financing in defi "

Although the CCI made it clear in its sharply formulated explanation, which is not true about the bill, he realizes that it is still in the early stages and that his authors are open to a dialogue about the best procedure. It is expected that there will be "many changes" at the draft law in the future.

22/ cci will continue to work tirelessly to ensure that political decision-makers have precise information about the operation of defi protocols and crypto cash machines. It is crucial that regulation creates a careful balance between the introduction of protective measures and the promotion of innovations in the USA

- cryptorate for innovation (@crypto_council) 19. July 2023