After the criminal charges against BitMEX, The crypto community is debating whether the decentralized financial sector will also face the wrath of regulators.
October 1, The US Commodity Futures Trading Commission announced charges against three BitMEX executives for violating the Bank Secrecy Act (BSA). due to the alleged weakness of the exchange’s anti-money laundering and KYC (Know Your Customer) guidelines.
DeFi protocols, including DEX (Decentralized Exchanges), have the virtue of having minimal AML and KYC procedures. However, many are now wondering whether DEXs must also comply with the BSA, even though most projects seek to decentralize ownership and governance in their communities.
While many DeFi protocols seem to believe that through complete decentralization they can bypass regulators, there are growing doubts as to whether this is true, and definitely is DeFi protocols have recently come under fire because they operate with a high degree of centralization, as 12 of the top 15 projects have management keys in “God Mode”.
So many on Twitter don’t understand why today’s crypto news is bad not only for CeFi but also for DeFi.
It has something to do with a legal nuance and something called the “Bank Secrecy Act” (BSA).
Here is a summary for you
– Adam Cochran (@AdamScochran) October 1, 2020
In one Twitter thread from 25 positions of Angel Investor and Blockchain Consultant Adam Cochran investigated a possible decrease in BitMEX fees for DeFi protocols.
Argued that Although authorities cannot close a DEX directly due to its decentralized nature, regulators could reach out to the main developers who have the management keys and to the domain providers who host the DEX front interfaces:
“If this were to be done with a protocol, a large number of users would stop using and not directly interact with the contract, which would essentially bring the protocol to a standstill,” he said.
“The bottom line is that a protocol is not out of the reach of the government. There are always pressure points that can be applied.”
But Cochran believes the crypto community should really want regulations like the BSA to apply to DeFi.and added, “There is a difference between wanting sovereignty and privacy over your funds and allowing criminal activity.”
In response to this, the Twitter user ‘tendies.eth’ argument What DEXs are already more compliant than their centralized counterparts as they can be traced back to the last transaction in the chain::
“CEXs can allow money laundering through their private databases. However, this does not apply to DeFi, where all broadcasts are public and transparent. DeFi is much more understandable than private banks and CEXs. “
The Chief Investment Officer of Apollo Capital Henrik Andersson told Cointelegraph, “Given the time it took to discuss this case.” [BitMEX]I don’t think DeFi cases will be brought up in the short term. “. He added that DeFi projects essentially need to stay calm and move on:
“DeFi projects must continue to focus on building an unstoppable financial infrastructure through free and open source projects.”
Dave Jevans, CEO of CipherTrace, said that I don’t think DeFi protocols will be regulated, but that would get there anyway.
“You will not be able to escape regulation for long,” said Jevans. “The eyes are on her.”
CryptoWhale said so 40,000 followers What do you think The regulation applies to 8,800 projects in the market “that are operated and closed illegally”, including DeFi tokens, exchanges and privacy tokens.
Once regulation is in place, the owners of these scam projects will flock to the markets to avoid prosecution.
That means billions of dollars will come out of the markets, which will undoubtedly have a huge impact on the general sentiment and will force us to continue the bear market.
– CryptoWhale (@CryptoWhale) October 1, 2020