• A bipartisan group of US lawmakers has proposed a new bill to regulate DeFi.
• The proposed bill has been met with pushback from the crypto community.
• The CANSEE Act seeks to bring DeFi protocols and platforms into compliance with anti-money laundering (AML) rules.
New U.S. Senate Bill Targets Compliance for DeFi
A bipartisan group of lawmakers in the United States has proposed new rules to bring the decentralized finance (DeFi) sector under compliance, introducing the Crypto-Asset National Security Enhancement and Enforcement (CANSEE) Act on Wednesday, July 19th.
Provisions of the CANSEE Act
The bill seeks to regulate DeFi protocols and platforms that provide access to these protocols, such as decentralized exchanges and wallet providers, holding them accountable for breaches of AML and sanctions rules on their platforms. Additionally, anyone investing more than $25 million in developing a protocol will be held responsible for these obligations when it isn’t clear who controls it.
Reception of CANSEE
The proposed bill has so far received significant backlash from the crypto community, with ConsenSys lawyer Bill Hughes describing it as a “de facto ban” due to its impractical requirements on these platforms. There is fear that malicious actors like North Korean state-sponsored Lazarus group could eventually get enough support for bills like this to pass into law.
Comparison to Previous Efforts
The bill bears similarities to a previous attempt by Senator Elizabeth Warren at regulating cryptocurrency markets in America—the Cryptocurrency Regulatory Framework Act of 2020—which saw her proposing tighter regulations on digital asset service providers such as exchanges and custodians; although her efforts ultimately failed due to insufficient support from other lawmakers at the time.
Regulations have become an increasingly important topic in crypto as its staying power and growth becomes more evident across jurisdictions worldwide; however they require a delicate balancing act between investor protection, international laws, and fostering innovation — all issues which are addressed by bills like CANSEE but may not be welcomed by many within the industry itself.