A Look at the Treasury Department's April 2023 Report on Decentralized Finance or "DeFi"
The report examines the vulnerabilities in DeFi, including potential gaps in the United States\u2019 Bank Secrecy Act/anti-money laundering regulatory, supervisory, and enforcement regimes for DeFi. We first discuss how Treasury defines DeFi, the report\u2019s findings regarding the use of DeFi services in the process of transferring and laundering illicit proceeds, the BSA\u2019s application to DeFi services and the impact of decentralization on BSA coverage, and the report\u2019s recommendations. We then discuss state efforts to regulate digital assets and federal enforcement actions against cryptomixers, including the challenge to OFAC\u2019s authority. We conclude with a discussion of the focus of state regulators on BSA/AML policies and procedures and steps businesses in the digital asset space can take to mitigate compliance risk.
Alan Kaplinsky, Senior Counsel in Ballard Spahr\u2019s Consumer Financial Services Group, leads the conversation, joined by Lisa Lanham, a partner in the Group, and Peter Hardy, a partner in and Co-Leader of the firm\u2019s Anti-Money Laundering Group.