Currently, many ventures embracing blockchain technology are doing so by utilising a traditional centralized model. In contrast, the decentralized exchanges and broader DeFi plays, whilst increasing their liquidity flow, currently have perceived KYC/ AML concerns.
Financial Action Task Force (FATF) guidelines suggest that Decentralized Applications (DApps) will need to comply with country specific laws enforcing FATF, AML, and Counter-Terrorism Financing requirements.
These guidelines call for countries to identify individuals with “control or sufficient influence” over DeFi initiatives, which could potentially result in founders of such initiatives becoming subject to rules requiring them to provide beneficiary information relating to transactions.
This will lead to ‘Regulated DeFi’ in practice, which is seen as essential for DeFi to become more usable for institutions.