PANews August 17 news, according to Cointelegraph reports, the U.S. Department of the Treasury is seeking public feedback on how to use digital identity tools and other emerging technologies to combat illegal financing in the cryptocurrency market. One proposal is to embed identity verification into DeFi smart contracts. According to the Treasury, digital identity solutions (which may include government ID, biometric technology, or portable credentials) can lower compliance costs while enhancing privacy protection. They can also make it easier for financial institutions and DeFi services to detect money laundering, terrorism financing, or evasion of sanctions before transactions occur.
One idea proposed in the consultation draft is that DeFi protocols can directly integrate digital identity credentials into their code. In this model, smart contracts can automatically verify users' credentials before executing transactions, effectively building KYC and anti-money laundering (AML) safeguards into the blockchain infrastructure.
This advisory report released this week stems from the newly enacted (Guidance and Establishment of the U.S. Stablecoin National Innovation Act) (GENIUS Act), which was signed into law in July.
