The entire crypto industry continues to collectively unravel the impact of US government sanctions on crypto mixer Tornado Cash. The move, which involves blacklisting wallet addresses with Tornado Cash, has taken the DeFi world by surprise as projects struggle to either resist or adapt to new land laws.
Decentralized derivatives exchange dYdX was one of the first projects to react to the news, blocking various crypto addresses interacting with Tornado Cash. Popular lending protocol Aave also seems to have acted quickly after Justin Sun revealed that his wallet was blocked.
dYdX and Aave have since withdrawn some, but still begs the question: if a project can simply flip a switch to ban certain users, how decentralized is it really?
and now DeFi As projects scramble to decide what to do, a new research firm, TRM Labs, catches the eye. The company, like Elliptic and Chainalysis, has emerged as a key switch-flipping service for most cryptocurrency projects to remain compliant.
The company claims it is not involved in blocking specific addresses. Instead, TRM Labs says it will only provide risk data to customers “for use in compliance programs.”
It’s like a signal service that can be more fine-tuned. DeFi A project that flags each time a risky address interacts with a project web page or frontend. The decision to block or ban addresses therefore falls on the shoulders of these projects.
TRM Labs says:
Sanctions flagging companies provide a convenient layout in terms of what these risk parameters look like.
This service will, for example, determine whether and to what extent any address interacting with the project is listed directly on OFAC’s sanctions list (“at risk of ownership”) or indirectly interacting with such address. are classified.
The further down a particular platform is on the list of affected addresses, the more users are effectively banned.
TRM Labs explained that centralized exchanges such as Binance and FTX typically implement flag services well below the risk ladder. DeFi project. This is because these types of entities usually adhere strictly to global AML standards.
The important thing here is that the decision to ban an address is made 100% at the discretion of the project in question.
and like this, DeFi It looks more and more like old fashioned fintech.
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