CipherTrace to Help DeFi Projects Comply with U.S. Sanctions

CipherTrace announced the launch of a Chainlink-based solution that will enable decentralized exchanges and other DeFi projects to comply with the United States Office of Foreign Assets Control (OFAC) sanctions regime.

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To create the CipherTrace DeFi Compli tool, the firm launched a node on the Chainlink network to tap oracle data and facilitate integration of the solution with existing DeFi infrastructures.

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In a statement, CipherTrace noted that in 2020 half of crypto industry hacks were linked to DeFi projects, and funds stolen from centralized exchanges were increasingly laundered through decentralized platforms, as in the $280 million KuCoin incident. Therefore the company expects regulators to pay more attention to sector players.

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Back in September last year, SEC Valeri Shchepanik, head of the SEC’s Strategic Center for Digital Assets and Innovation, warned that entities enabling lending or borrowing money, earning interest, exchanging and opening positions fall under financial activity regulation, including AML/CFT rules, the firm said.

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“Shchepanik’s statements imply the inevitable application of sanctions, as well as AML/CFT laws. It is time for DeFi projects to take steps to ensure compliance, or risks will arise,” said CipherTrace CEO Dave Jevans.

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According to him, one of the main current issues for DEXs should be preventing the financing of the development of weapons of mass destruction.

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Earlier, CipherTrace developed a transaction-tracking tool for the privacy-focused cryptocurrency Monero. The company filed patents for the technologies created for this purpose.