The US Treasury ID ID ID plan draws a violent reaction star-news.press/wp

The US Treasury Ministry explores whether the identity examination should be built directly in smart contracts for decentralized financing (Defi), the step that warns critics against rewriting the foundations of funding without permission.

Last week, the agency opened a consultation under the National Guidance and Construction Law of the United States Law (Genius Law), which was signed to become a law in July. The law directs the treasury to evaluate the new compliance tools to combat illegal financing in the encryption markets.

One of the ideas was to include identity adoption data directly in smart contracts. In practice, this may mean that the Defi protocol can automatically verify the user’s government identifier, biometric accreditation data, or digital portfolio certificate before allowing follow -up treatment.

Supporters argue that the construction knows that your customer (KYC) and the combination of money laundering (AML) can simplify the Blockchain infrastructure to simplify compliance and maintain criminals outside Defi.

Fraser Mitchell, the chief product official at AML Provider Smartsearch, Cointelegraph that these tools can “can reveal unknown transactions that make these networks very attractive to criminals.”

Mitchell said: “In the actual time of suspicious activity, it can make it easier for the platforms to reduce risks, discovery and preventing finally from laundering money from using their networks to launder the returns from some of the worst crimes in the world.”

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Defi ID Check: Data Protect or Risk Control?

Mitchell admitted to giving privacy, but he argued that there were solutions. “Only the necessary data for monitoring or organizational audits should be stored, with all elsewhere deleted. Any data that is kept at the class level must be encoded, which reduces the risk of large penetration.”

However, critics say that the proposal risks the DEFI essential cavity. Mamu Cuundogim Toure, Opeonto CEO, compared the plan to “put cameras in every living room.”

“On paper, the abbreviation of compliance appears to be elegant. But you turn a neutral infrastructure without permission to one where access to identity -approved identity papers. This mainly changes what is supposed to be Defi,” said Cointelgraph.

He warned that if biometric or governmental identifiers are linked to the Blockchain governor, “every treatment that risk becomes permanently tracked to a real person. Check the pseudonym, and thus, the ability to deal without observation.”

For Toure, the risk exceeds compliance. “Financial freedom depends on the right to a special economic life. The inclusion of an identifier at the protocol level leads to erosion and creates dangerous precedents. Governments can monitor transactions, blacklist portfolios, or even automate tax collection directly through smart contracts.”

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Who leaves behind?

Another source of concern is exclusion. Billions of people in the world still lack the identification of the official identity. If the Defi protocols require accreditation data issued by the government, the entire societies, migrants, refugees, and the uninvited risks that are closed.

“It may restrict access to users who prefer not to disclose his identity or cannot meet the requirements of identity, which limits Defi’s democratic nature,” Tori said.

Data safety is also a flash point. Connecting biometric databases to financial activity can make breakthroughs more disastrous, exposing both money and personal identity in one breach.

Critics emphasize that the choice is not a bilateral between crime and collective control. Privacy maintaining tools such as zero and decentralized identity (DID) provides ways to verify eligibility without exposing the full identity.

With ZKPS, users can prove that they are not on the list of penalties or more than 18 years without revealing those they are. Did work frameworks allow users to obtain and detect accreditation data selectively. “Instead of the government’s fixed definitions, users carry a selective verification data,” Tori said.

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