US Treasury weighs digital ID verification in DeFi to tackle illicit finance

The Treasury is considering embedding digital identity checks into DeFi smart contracts as part of its GENIUS Act consultation on crypto compliance tools.

The US Department of the Treasury is seeking public feedback on how digital identity tools and other emerging technologies could be used to fight illicit finance in crypto markets, with one option being embedding identity checks into decentralized finance (DeFi) smart contracts.

The consultation, published this week, stems from the newly enacted Guiding and Establishing National Innovation for US Stablecoins Act (GENIUS Act), signed into law in July.

The Act, which sets out a regulatory framework for payment stablecoin issuers, directs the Treasury to explore new compliance technologies, including application programming interfaces (APIs), artificial intelligence, digital identity verification and blockchain monitoring.

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