US Treasury Considers Digital ID Requirements for DeFi Platforms to Combat Financial Crime
The post US Treasury Considers Digital ID Requirements for DeFi Platforms to Combat Financial Crime appeared on BitcoinEthereumNews.com.
The US Treasury Department wants to embed identity verification directly into decentralized finance (DeFi) platforms as part of a major push to stop money laundering and other illegal activities in cryptocurrency markets. The Treasury launched a public consultation on August 18, asking for feedback on how digital identity tools could automatically check users before they complete transactions. The proposal stems from the GENIUS Act, which President Trump signed into law in July. Under this system, DeFi smart contracts would verify a person’s identity credentials before executing any transaction. This would build Know Your Customer (KYC) and Anti-Money Laundering (AML) safeguards directly into blockchain infrastructure. What the Treasury Proposal Includes The Treasury wants to explore four main technologies to fight financial crime in crypto: Application programming interfaces (APIs) that let different software systems communicate Artificial intelligence to analyze transaction patterns Digital identity verification using government IDs or biometrics Blockchain monitoring tools to track suspicious activities Digital identity solutions could include government-issued documents, biometric data, or portable credentials. These tools would reduce compliance costs for financial institutions while protecting user privacy, according to the Treasury. The system could help banks and DeFi services detect money laundering, terrorist financing, or sanctions violations before transactions happen rather than after. GENIUS Act Drives New Requirements The GENIUS Act creates the first comprehensive US regulatory framework for payment stablecoins – digital currencies backed by US dollars or Treasury bonds. The law requires stablecoin companies to maintain full backing with safe assets like cash or short-term government bonds. Companies issuing more than $10 billion worth of stablecoins face federal oversight, while smaller firms can work with state regulators. President Trump’s administration sees this as strengthening US dollar dominance globally. Stablecoin companies already rank as the 18th largest holders of US government debt worldwide. The law takes effect…
Filed under: News - @ August 18, 2025 2:17 am