Blockchain Association criticizes new US DeFi regulation bill

The Blockchain Association has condemned the proposed US DeFi legislation as an unworkable solution incompatible with the industry.

Blockchain Association, a nonprofit organization that promotes a pro-innovation policy environment for the web3 economy, has condemned the recently introduced Crypto-Asset National Security Enhancement Act of 2023.

The bipartisan bill proposed by senator Jack Reed (D-RI) and co-sponsored by Mike Rounds, Mitt Romney, and Mark Warner aims to implement strict anti-money laundering (AML) rules on decentralized finance (DeFi) protocols.

The lawmakers hope the legislation will curb crypto-related crimes and make it impossible for bad actors to circumvent sanctions via the DeFi route. 

If enacted, the legislation will make it mandatory for DeFi platforms to collect and compile user data, alert authorities to suspicious transactions, and prevent sanctioned entities from using their solutions.

Blockchain Association CEO Kristin Smith has criticized the proposed bill, arguing that such legislation is incompatible with the workings of decentralized finance. 

The body has clarified that fraudulent transactions represented only a meager fraction of the total volume of crypto transactions last year compared to the traditional finance sector. 

The Association further stated that federal law enforcement agencies are already equipped with the necessary resources and skills to tackle these crimes. As such, the proposed “additional punitive revaluations outlined in the bill are redundant.”

Despite a high level of digital asset adoption by US residents, the regulatory climate for crypto has been quite harsh for market participants, with the Gary Gensler-led Securities and Exchange Commission (SEC) recently demanding more funding from the government to fuel its incessant enforcement-style regulation.

As reported by crypto.news on June 20, senator Kennedy Jr. has raised concerns over Gensler’s authority and the SEC’s competency in tackling crypto-related fraud. 

During a July 19 Senate Committee hearing, the senator argued that Sam Bankman-Fried’s high-profile FTX scandal is evidence of the agency’s gross incompetence.