Why the US Treasury Raised Illicit Finance Concerns on the DeFi Industry

North Korea, one of the world's most isolated countries, is one of the worst offenders in money laundering through the decentralized finance (DeFi) industry, the US said in a report.

Key TakeAways

• Treasury report explores how 'illegal actors' are abusing the DeFi industry.
• Money laundering rules can be stricter for decentralized exchanges.
• The latest industry crackdown could spell more trouble for Binance. {alertSuccess}

The risk assessment includes recommendations from the US government to address illicit finance risks in the DeFi industry. The guidance aims to expand United States Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) supervision to address gaps related to the nascent blockchain finance sector.

Brian E. Nelson said, “Our assessment shows that illegal actors, including criminals, scammers, and North Korean cyber actors, are using DeFi services in the process of laundering illegal funds. need to address these risks." Under Secretary of the Treasury for Terrorism and Financial Intelligence.

One of the key areas highlighted in the report is the work of decentralized exchanges (DEXs), with the Treasury saying that 649 different DEXs combined have reported total value locked (TVL) as of December 19, 2022. were $15.8 billion. The report continues to say this means that illegal actors are more likely to use DEXs instead of centralized exchanges like Coinbase ( COIN ) because of the reduced likelihood of AML/CFT measures.

However, allegations of money laundering in the crypto industry are not limited to DeFi. Binance, the world's largest cryptocurrency exchange and a centralized platform has been under regulatory scrutiny for very many reasons.

In December 2022, US prosecutors were reportedly nearing the end of a two-year-long investigation and Justice Department officials were considering charges against Binance and its executives.

This was followed last week by civil enforcement from the Commodity and Futures Trading Commission (CFTC), which accuses the exchange and its founder of evasion of federal law and operating an "illegal digital asset exchange."