Polygon Labs Stresses the Importance of DeFi to US National Security


In order to strengthen national security, Polygon Labs and Arktouros suggest that DeFi be classified as vital infrastructure and urge U.S. control.

Decentralized finance (DeFi) protocols should be categorized as “critical infrastructure” vital to the national and economic security of the United States, according to a comprehensive regulatory framework proposed by Polygon Labs and Arktouros, an emerging technology law firm. “A Conceptual Framework for Combating Illicit Finance Activity in Decentralized Finance,” a 45-page study outlining the proposed framework, proposes that the U.S. Treasury’s Office of Cybersecurity and Critical Infrastructure Protection (OCCIP) oversee such operations.

Differentiating DeFi systems that are really decentralized from those that have large centralization sites is emphasized in the article. Coordinating efforts to strengthen the security of key infrastructure in the financial services industry is a crucial job for the OCCIP, even though it isn’t a financial regulator. Importantly, the new “critical communications transmitters” class that the proposed framework seeks to establish would be a key component of real DeFi networks and would be liable for certain duties aimed at protecting economic and national security.

Although non-decentralized DeFi protocols do exist, the authors stress that they must be compliant with current financial rules. In line with FinCEN recommendations for autonomous oversight, the framework distinguishes between centralized finance (CeFi) and traditional finance (TradFi).

Jake Chervinsky, an authority in the field, brought attention to the fact that lawmakers in Washington, DC, are giving illegal financing more attention than other parts of the digital asset market. This change may herald a major breakthrough in resolving regulatory issues.

In order to bring the suggested framework in line with the Treasury’s mission of fostering economic growth and guaranteeing the nation’s financial stability, the authors stress the need to balance the framework’s focus on illegal activities with its encouragement of beneficial ones.

As the importance of the DeFi industry becomes more widely recognized, the proposed regulatory framework may herald a change in the current regulatory climate in the United States. A more sophisticated method of DeFi supervision, encouraging innovation while resolving issues of national security, may be possible with the help of this framework if it were to be put into action.

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