Sponsors
11 Democrat
Sean CastenIL-6
The CODE Act of 2025 mandates the Treasury Secretary to establish a public-private partnership program. This program will explore integrating anti-money laundering, identity verification, sanctions, and cybersecurity controls directly into decentralized smart contracts prior to deployment, and investigate "regulatory gateways" for post-deployment modifications. The bill also requires FinCEN to issue an advisory and the Treasury to define DeFi terms, ultimately mandating risk-based AML and sanctions compliance programs for decentralized finance services.
This bill introduces a framework primarily aimed at enforcing anti-money laundering (AML) and sanctions compliance within decentralized finance (DeFi). While the stated goal includes developing "innovative solutions," the methods proposed lean heavily towards increasing state control and surveillance. Requiring the integration of compliance controls directly into decentralized smart contracts prior to deployment, and exploring "regulatory gateways" for post-deployment changes, fundamentally challenges the permissionless and immutable nature of DeFi protocols. This approach signifies an intent to re-engineer the technology itself to accommodate oversight, rather than merely clarifying existing compliance obligations for participants. The bill's broad definition of "decentralized finance service" grants significant discretionary power to the Treasury, creating regulatory uncertainty. Furthermore, the findings section heavily emphasizes the use of DeFi for illicit activities, aligning with an anti-crypto framing. This bill imposes significant architectural constraints and broad regulatory burdens, moving beyond standard compliance measures.
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1 Democrat