The U.S. Department of the Treasury has warned of criminals using decentralized finance (DeFi) protocols but admitted that money launderers and terrorists typically prefer fiat currencies over crypto. 

In its “Illicit Finance Risk Assessment of Decentralized Finance” report released today, the U.S. body said that ransomware crooks, thieves, scammers and other criminals are “using DeFi services in the process of transferring and laundering their illicit proceeds.”

It added that many DeFi apps fail to comply with America’s anti-money laundering and countering the financing of terrorism (AML/CFT) rules and were therefore being exploited by crooks. 

Though the report did note that “money laundering, proliferation financing, and terrorist financing most commonly occur using fiat currency or other traditional assets as opposed to virtual assets.”

DeFi refers to the industry within the crypto sphere which aims to make traditional finance more automated and accessible to all via decentralized applications. 

The idea is that things like taking out a loan or earning interest on savings become quicker, more accessible and without a costly middleman. Such tools allow anyone to connect a self-custodied crypto wallet to a website, execute trades or other transactions, all without ever revealing any personally identifiable information to the

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Author: Mathew Di Salvo

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