U.S. Treasury Explores Incorporating Identity Checks into Smart Contracts, Raising Concerns About Hollowing Out DeFi Core

According to ChainCatcher news reported by Cointelegraph, the U.S. Treasury is exploring whether identity checks should be directly incorporated into decentralized finance (DeFi) smart contracts, with critics warning that this move could rewrite the fundamental basis of permissionless finance.

Mamadou Kwidjim Toure, CEO of Ubuntu Tribe, stated that this initiative seems like 'installing cameras in every living room,' potentially hollowing out the core of DeFi, as it transforms a neutral, permissionless infrastructure into one that requires government-approved identity credentials to access.

However, supporters believe that establishing Know Your Customer (KYC) and Anti-Money Laundering (AML) checks within blockchain infrastructure can simplify compliance and keep criminals at bay.