U.S. DEPARTMENT OF THE TREASURY APRIL 2023 Illicit Finance Risk Assessment of Decentralized Finance
The U.S. Department of the Treasury has conducted an illicit finance risk assessment of decentralized finance.
This risk assessment explores how illicit actors are abusing what is commonly referred to as decentralized finance DeFi services as well as vulnerabilities unique to DeFi services.
The findings will inform efforts to identify and address potential gaps in the United States’ anti-money laundering and countering the financing of terrorism AML CFT regulatory, supervisory, and #enforcement regimes for DeFi. There is currently no generally accepted definition of DeFi, even among industry participants, or what characteristics would make a product, service, arrangement or activity “decentralized.”
The term broadly refers to #virtualasset #protocols and services that purport to allow for some form of automated peer-to-peer P2P transactions, often through the use of self-executing code known as “smartcontracts” based on #blockchain technology.
This term is frequently used loosely in the virtual asset industry, and often refers to services that are not functionally decentralized. The degree to which a purported DeFi service is in reality decentralized is a matter of facts and circumstances, and this risk assessment finds that DeFi services often have a controlling organization that provides a measure of #centralized administration and governance.