The U.S. Treasury is considering embedding digital identity verification mechanisms in Decentralized Finance protocols.

[The U.S. Treasury Considers Embedding Digital Identity Verification Mechanisms in DeFi Protocols] The U.S. Treasury has launched a public consultation under the GENIUS Act, aiming to explore the integration of digital identity verification tools into DeFi smart contracts to combat illegal financial activities. The proposal includes automatically executing KYC/AML checks on-chain through API interfaces, while also employing technologies such as biometrics to drop compliance costs. Banking groups have warned that if there are regulatory loopholes in stablecoin interest payments, it could lead to a $6.6 trillion outflow of bank deposits. Public consultation will continue until October 17, 2025, after which the Treasury will submit a report to Congress and may introduce new regulations.

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