Opinion: The US Treasury Department is exploring incorporating identity checks into smart contracts, which may hollow out the core of DeFi.

the U.S. Department of the Treasury is exploring whether identity checks should be directly incorporated into decentralized finance (DeFi) smart contracts, with critics warning that this move could rewrite the fundamental basis of permissionless finance. Mamadou Kwidjim Toure, CEO of Ubuntu Tribe, said that this move is like "installing cameras in every living room," which could ultimately hollow out the core of DeFi by turning a neutral, permissionless infrastructure into one that requires government-approved identity credentials to access. However, supporters argue that establishing Know Your Customer (KYC) and Anti-Money Laundering (AML) checks in blockchain infrastructure can streamline compliance and keep criminals at bay.