The U.S. Treasury is gathering public input on the application of digital identity tools and new technologies to prevent illegal financial activities in the cryptocurrency market.

The solution may include integrating direct identity verification into DeFi Smart Contracts, helping reduce compliance costs while enhancing privacy protection within the blockchain ecosystem.

MAIN CONTENT

  • The U.S. Treasury aims to integrate digital identity into DeFi to prevent money laundering and terrorist financing.

  • The solution using digital identity may apply various forms of verification such as ID cards, biometrics, or mobile certificates.

  • The draft is part of the GENIUS Act framework aimed at promoting stable innovation in the cryptocurrency sector in the United States.

What is the U.S. Treasury doing to prevent illegal financial activities in cryptocurrency?

The U.S. Treasury is calling for public feedback on how to use digital identity technology along with new solutions to prevent illegal financial activities in the cryptocurrency market. This is an effort to align with the strategy to enhance the efficiency of safe and transparent financial management.

A prominent solution is integrating identity verification into Smart Contracts in the DeFi space. This helps provide pre-transaction control (before the transaction occurs), contributing to mitigating money laundering risks and avoiding violations of sanctions.

Why is integrating digital identity into DeFi important?

Directly integrating digital identity certifications into DeFi Smart Contracts helps automatically supplement KYC and AML standards, enhancing the reliability of transactions on the blockchain. At the same time, this will reduce compliance costs and protect user privacy.

Proposed verification formats may include government ID cards, biometric data, or mobile identity certificates, ensuring seamless and secure verification processes. Consequently, both financial institutions and DeFi services will easily detect suspicious transactions before payment occurs.

Strengthening digital identity controls will create significant progress toward making the DeFi market safer while maintaining a balance between legal compliance and user privacy protection.

(Excerpt from the U.S. Treasury report, 2024)

What role does the GENIUS Act play in driving innovation in the Stablecoin and DeFi space?

The draft was released under the newly signed GENIUS Act in July 2024, aiming to promote innovation and effectively manage Stablecoin in the United States. This is an important starting point for integrating digital identity into DeFi applications and the broader cryptocurrency market.

This law lays the foundation for balancing the development of DeFi technology with ensuring financial security, building trust for investors and users when participating in complex blockchain systems.

How can identity integration models work in DeFi?

One idea in the draft is that DeFi protocols can directly embed digital identity credentials into the Smart Contract code. Consequently, Smart Contracts will automatically verify user information before processing transactions, effectively applying KYC and AML policies right from the blockchain infrastructure.

This provides dual benefits, reducing the risk of financial crime while ensuring transparency and safety for the DeFi network — a necessity in the increasingly complex and evolving cryptocurrency market.

Frequently asked questions

How will the U.S. Treasury apply digital identity technology to DeFi?

The Treasury Department proposes to directly integrate digital identity verification into DeFi Smart Contracts, facilitating automatic user verification before transactions take place.

What benefits does digital identity in DeFi provide beyond anti-money laundering?

This not only reduces compliance costs but also enhances privacy protection and improves safety for users and financial institutions.

How does the GENIUS Act affect the Stablecoin and DeFi markets?

The law creates a legal framework for technological innovation in Stablecoin and DeFi, enhancing stability and transparency for the cryptocurrency market in the United States.

How can Smart Contracts automatically verify user identity?

Smart Contracts will be programmed to check and verify the user's digital identity certification before allowing transactions to occur.

Does the integration of digital identity affect privacy?

The solution is designed to minimize risks while preserving privacy through the use of advanced security and encryption technologies.

Source: https://tintucbitcoin.com/tai-chinh-my-xac-thuc-defi-chong-phi-phap/

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