Decentralized Cryptocurrency Markets Threaten U.S. National Security, Treasury Says

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Decentralized Cryptocurrency Markets Threaten U.S. National Security, Treasury Says

WASHINGTON-The burgeoning decentralized cryptocurrency market threatens U.S. national security and needs greater oversight and enforcement against money-laundering, the U.S. Treasury Department said on Thursday. The warning, in a new Treasury report assessing the risk of the so-called DeFi markets, lays the foundation for tougher regulations and punitive action by federal agencies.
Competition is only a threat to the dollar because the dollar is not sound money.
Competition is only a threat to the dollar because the dollar is not sound money.
It coulda been had it been managed properly from the get-go.

The only reason competition to it arose, is due to its status having been abused by our clueless (and extremely short sighted) "leaders" for many many Decades.

Had they always done right thing, gold could easily still be $20.67/oz.
CATO published an analysis of the Treasury report (long):
Yesterday, the Treasury Department released an Illicit Finance Risk Assessment of Decentralized Finance (DeFi). Looking past the report’s, frankly half‐hearted, fear mongering and skepticism that disintermediated financial tools deserve different regulatory treatment than financial intermediaries, the report makes important acknowledgements that DeFi’s illicit finance risk is relatively small and that DeFi technology is unique. The report’s sparks of recognition that, on some level, DeFi is different from traditional finance—in enabling peer‐to‐peer financial transactions and potentially mitigating illicit finance risk through technology—ought to be noted by other U.S. policymakers who actively apply ill‐fitting legacy rules to new tools and exaggerate those tools’ risks.

While the report states that criminals and rogue states exploit DeFi to launder money and carry out cyberattacks endangering national security, it tends to bury the lede with respect to the scope of the problem. Still, Treasury ultimately acknowledges that, all told, crime is a “subset” of overall DeFi activity, which itself is a “minor portion” of crypto activity, and that the crime Treasury is concerned with is mainly a problem of traditional finance:

[M]oney laundering, proliferation financing, and terrorist financing most commonly occur using fiat currency or other traditional assets as opposed to virtual assets.

Perhaps for this reason, the report insists that its limited identification of examples of illicit activity over DeFi should not be taken to indicate, well, that there are limited instances of illicit activity over DeFi:

Given how recently the DeFi market has developed and expanded, there were relatively few case examples that this assessment could include. The number of case studies does not, however, reflect the level of risk identified in this assessment.

Of course, it may be that a non‐exhaustive list of examples doesn’t reflect the full extent of a problem. But persuasively making that argument generally requires providing additional evidence that speaks to the scale of the problem, beyond mere conclusory statements regarding a vague “level of risk.” However, in the rare instances where the report does address scale, it largely undermines the idea that DeFi is anything other than a relatively minor contributor to overall illicit finance risk, including for money laundering, proliferation financing, and terrorist financing, as well as drug trafficking, where the report notes, “[T]he size and scope of drug proceeds generated on the darknet and laundered via virtual assets remain low in comparison to cash‐based retail street sales.”

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