Treasury Assistant Secretary Rosenberg Highlights Findings from DeFi Risk Assessment

The Treasury Office of Terrorist Financing and Financial Crimes ("TFFC") Assistant Secretary Elizabeth Rosenberg reviewed key findings from "the first illicit finance risk assessment conducted on decentralized finance (DeFi) services." She expressed hope that "every person with an interest in DeFi will read the [risk assessment], use it in their own decision-making, and provide substantive feedback on how the risk environment is changing as DeFi technologies advance."

In remarks before the Atlantic Council, Ms. Rosenberg said that based on the assessment, TFFC found that DeFi services are often used by bad actors, such as ransomware cybercriminals, to launder funds. She highlighted the finding that DeFi services are typically controlled by an organization providing centralized administration and governance, and that individuals or organizations associated with DeFi services are often already subject to AML/CFT obligations.

Ms. Rosenberg identified noncompliance with U.S. AML/CFT as a "key regulatory vulnerability" associated with the use of DeFi services. She reminded market participants that if a DeFi service performs the functions of a covered financial institution under the Bank Secrecy Act, then it is subject to BSA obligations, including AML/CFT requirements.