Supervisors Symposium

T R A N S A C T I O N M O N I T O R I N G

• Distributed ledger architectures (both public and private) allow for real time monitoring of transaction activities between parties. Many applications now allow observers to track the flow of funds and other activities, and are able to identify “at risk” blockchain participants. • Centralized Exchanges act as intermediaries and facilitate reporting requirements at both the state and federal level. These exchanges act as traditional intermediaries. • Decentralized Exchanges can be incentivized to develop permissioned access points which would provide the benefits of access to DeFi Protocol software, while allowing commercial users to transact with known parties who have met industry ‐ standard KYC/AML and compliance checks. See Lipton & Cohen, DeFi: A Pathway Forward, IFLR (2021).

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GLOBAL REGULATORY GUIDANCE

• DLT/Crypto/DeFi are global by design and require a global harmonization of regulatory supervision and compliance standards • To that end, the Financial Action Task Force (FATF), the global standard setting body for anti ‐ money laundering released its “Updated Guidance For A Risk Based Approach For Virtual Assets and Virtual Asset Providers.” • The President's Working Group on Financial Markets ‐ a Treasury ‐ led regulatory body ‐ issued a report on Stablecoins. • The report's recommendation is for Congress to "urgently" pass a law that would regulate stablecoin issuers much like banks subjecting them to strict supervision by banking regulators while also providing some form of government backstop in the event of crises. • The report said Congress should also require stricter oversight of stablecoin wallet providers which hold the digital currency on behalf of customers.

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