The U.S. Treasury Department has published the 2023 DeFi Illicit Finance Risk Assessment, the first illicit finance risk assessment conducted on decentralized finance (DeFi) in the world.
The 2023 DeFi Illicit Finance Risk Assessment identifies the scope of issues and also includes recommendations for government actions as a means of reducing illicit finance risks associated with DeFi services. In short, the effort seeks to protect the nation’s financial system integrity.
“Risk assessments play a foundational role in promoting understanding of the illicit finance risk environment and more effectively protecting the integrity of the U.S. financial system,” Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson said.
“Our assessment finds that illicit actors, including criminals, scammers, and North Korean cyber actors are using DeFi services in the process of laundering illicit funds. Capturing the potential benefits associated with DeFi services requires addressing these risks.”
According to Nelson, the private sector should use the assessment findings to inform their own risk mitigation strategies and to take clear steps to prevent illicit actors from abusing DeFi services.
The assessment offers recommendations for government actions to mitigate DeFi services illicit finance risks that include strengthening domestic anti-money laundering and countering the financing of terrorism (AML/CFT) regulatory supervision; considering additional guidance for the private sector on DeFi services’ AML/CFT obligations; and assessing enhancement to address any DeFi services AML/CFT regulatory gaps.