The U.S. Treasury has initiated a public consultation under the recently enacted GENIUS Act, exploring the integration of digital identity verification into DeFi smart contracts to enhance AML and KYC compliance in decentralized finance. In this forward-looking proposal, DeFi protocols could incorporate identity checks directly into the transaction layer, enabling automatic verification via government-issued IDs, biometric data, or secure portable credentials prior to execution. This measure aims to curb illicit financial activities—such as money laundering, terrorism financing, and sanctions evasion—while minimizing friction and preserving the decentralized ethos of DeFi platforms.
Technologies under consideration include APIs, AI, and blockchain monitoring, intended to streamline compliance and reduce operational costs. However, the plan faces critical challenges around data privacy, scalability, and the delicate balance between innovation and regulatory oversight. Feedback from stakeholders—including DeFi developers, technologists, and financial institutions—is invited until October 17, 2025, after which the Treasury will analyze responses and may propose regulatory guidance or legislative updates. If implemented, this initiative could significantly reshape the digital asset ecosystem, embedding compliance infrastructure within the very framework of DeFi.
#US Treasury
#GENIUSAct
#DigitalID
#DeFi
#KYC
#AML
#SmartContracts
#PublicConsultation
#CryptoCompliance
#APIs
#AI
#BlockchainMonitoring
#DataPrivacy
#RegulatoryInnovation
