Blockchain analyst firm Coinfirm recently unveiled a new money laundering tool for decentralized finance, or DeFi, a niche focused on cryptocurrencies – a sector on the horizon for a regulatory campaign, according to Jacob Vigolik, CTO at Coinfirm.
“DeFi may soon have regulatory issues,” Vegolik told Cointelegraph. “The amount of money going through DeFi is growing significantly.”
The growth of the Defi cryptocurrency will skyrocket in 2020. In February, the total value of this sector reached $ 1 billion. Amid significant growth and interest, the niche grew to $ 10 billion at some point in 2020.
During the big DeFi year, the central stock exchanges have faced some challenges. In September, KuCoin faced a massive hack, as a result of which several projects froze the movement of the assets involved. The BitMEX derivatives exchange in October also came under severe regulatory action by the CFTC and the US Department of Justice, two US governing bodies, resulting in the seizure of one of the brass.
A KuCoin thief (or thieves) could use DeFi more efficiently to dispose of assets, making it difficult to track even if the unit in charge did not have a lot of DeFi experience. However, it can be said that DeFi is still a potential vehicle for promoting illegal activity.
The stolen KuCoin funds channeled to DeFi are worrying regulators, Fijolek said. To combat this situation, Coinfirm created the Oracle AMLT, an anti-money laundering, or AML, tool for DeFi under the AMLT wing.
Essentially, oracle can filter headers and check to see if they were previously associated with something suspicious. Then projects and exchanges can freeze funds or transfers from specified addresses, respectively. Vigolik explained:
“Basically, the first tool we created was the ‘oracle’ and we call this  report oracle because it allows you to create the same compliance report that central exchanges usually use in a completely consistent way. So it will send transaction requests, what we call it, Oracle with the report you want information about, and after some blocking, you can ask about the transaction receipt status for that address, and this will give you a C score and a report ID ” …
With new technology comes equal technological development for the organization of the aforementioned new sectors. The new Coinfirm toolkit increases its anti-money laundering capabilities, although in practice execution may be more difficult. Ultimately, freezing transactions will depend on individual projects; An idea that remains controversial in the industry is centered around the decentralized principles of Bitcoin – a global resource that cannot be stopped.