Analyst firm CipherTrace has announced the DeFi Compli tool. It will exclude the interaction of DeFi projects with cryptocurrency addresses from the OFAC sanctions list.
DeFi Compli will monitor that addresses used for trading on Decentralized Exchanges (DEX) are not blacklisted by the Office of Foreign Assets Control (OFAC). This list includes cryptocurrency addresses related to drug trafficking, terrorist financing, “election interference”, cybercrimes and other illegal activities according to the US government.
CipherTrace has launched its own node on the Chainlink network to use an oracle to track such addresses. Decentralized exchanges and DeFi projects will be able to integrate the solution through an API to prevent transactions with blacklisted participants.
According to DeFi Pulse, the volume of crypto assets blocked in DeFi is already $ 51.5 billion to date.CipherTrace CEO Dave Jevans believes that if DeFi provides lending, DeFi projects should follow the same rules as regular financial institutions. … Valerie Szczepanik, senior adviser to the US Securities and Exchange Commission (SEC), said last year that DeFi should also be subject to securities, banking and credit laws and anti-money laundering (AML) rules.
John Jefferies, chief financial analyst at CipherTrace, explained that the new tool will track cryptocurrency addresses rather than individual users. When people start using their wallets, decentralized exchanges will interact with the oracle. If the user’s address is not on the OFAC sanctions list, things will remain as transparent and easy as before, Jeffreys said. He added that in the future, DeFi Compli will be able to determine if the source of funds is associated with illegal activities.
“Decentralized platforms are also virtual asset service providers, so they have to comply with regulatory requirements. Otherwise, there will be a risk of forced closure of such platforms. This could lead to a domino effect and overwhelm the entire world of decentralized finance, ”Jeffreys said. According to CipherTrace, the number of crimes in the DeFi industry has increased in 2020. As this industry develops, the interest of cybercriminals who exploit protocol vulnerabilities also grows.
