CipherTrace Wants To Crack Down On DEXs That Are Bypassing OFAC Regulations

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CipherTrace announces a new DeFi compliance tool, aptly named DeFi Compli, to establish stronger guidelines towards the prevention of further US-based decentralized exchanges (DEXs) bypassing the Office of Foreign Assets Control (OFAC) regulations.

To give a bit of hindsight, the US currently restricts its companies from conducting business with specific countries and citizens. For example, Coinbase isn’t allowed to trade with any Iranian crypto trader. While such restrictions are clear on paper, DEXs provide people who are within the stringent US sanctions to somehow bypass OFAC, or at the very least, cushion their fall by a sizeable margin. CipherTrace’s DeFi Compli wants to change just that. It aims to ensure that DEXs all fall in line with the regulations set upon by the US Treasury OFAC division.

As per the CEO of CipherTrace, Dave Jevans, DeFi Compli couldn’t have come at a greater time considering the continual rise in total value locked within DeFi, which is currently approximated at $51.4 billion by sector-specific data aggregator DeFi Pulse. Jevans adds that the increased numbers could potentially attract even more malicious actors, thus, the need for guideline reinforcement. To clarify, decentralized products that currently facilitate conventional financial activities, such as lending, would still be subject to the present regulations.

According to the announcement, CipherTrace’s new tool is ultimately made possible thanks to Chainlink’s decentralized oracles. Specifically, CipherTrace runs a node on Chainlink’s network, which it then can freely use to collect data and promptly communicate with fellow DeFi projects.

Although some may initially see this development as something that could negatively impact the DeFi space, CipherTrace’s CMO and CFA John Jeffries believe that this is ultimately for the good of everyone. According to him, without dedicated compliance tools, DEXs might inadvertently fail to comply with standing regulations, thus, putting them at several business existential risks.

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