The CFTC acknowledges the challenges associated with developing identification requirements for DeFi systems, as there is a risk of intruding on user privacy. Nevertheless, the CFTC argues that encroaching on user anonymity is justifiable if it safeguards against fund losses and fraud. The regulatory body believes that thorough examination of the existing regulatory framework is necessary to determine whether DeFi activities fall under current laws or require new ones.
Central to the CFTC’s message is the need for lawmakers to establish identity verification requirements across the entire DeFi ecosystem. This entails implementing rules for individuals providing identification data, ensuring that sufficient information about clients is collected. CFTC Commissioner Christy Goldsmith Romero emphasizes the importance of striking a balance between privacy and accountability.
“Since joining the CFTC, I have consistently emphasized the need to study issues linked to digital assets, as failing to do so may result in unforeseen consequences. The lack of accountability in the DeFi sector poses significant risks,” explained the CFTC commissioner.
Earlier, the regulator announced that it had awarded $16 million to cryptocurrency informants in 2023, leading to legal action against various industry companies. In November, the CFTC warned that cryptocurrency exchanges faced prosecution if they operated without implementing Know Your Customer (KYC) procedures.