Casten Introduces Bill to Combat Illicit Activity in DeFi
Washington, D.C. — Today, U.S. Representative Sean Casten (IL-06) introduced the Compliant Operations of Decentralized Entities (CODE) Act of 2025, legislation to combat illicit activity and address cybersecurity concerns associated with decentralized finance (DeFi).
“We cannot ignore the illicit activity currently ongoing within the cryptocurrency ecosystem, like North Korean hackers exploiting vulnerabilities in DeFi systems to steal cryptocurrency and fund their nuclear weapons program,” said Rep. Sean Casten. “We can and should leverage automated systems to instantly flag, halt, or address illicit finance and cybersecurity issues. The CODE Act strikes the right balance by exploring innovative, technological solutions for DeFi entities before prescribing risk-based requirements to strengthen compliance with U.S. anti-money laundering laws.”
Specifically, the CODE Act creates a public-private partnership with the Department of the Treasury, key federal agencies, DeFi services, and risk management experts to explore integrating anti-money laundering (AML), sanctions, Know-Your-Customer (KYC), and cybersecurity checks into the computer code that underpins DeFi services.
The bill also includes language addressing conflicts of interest to prohibit cryptocurrency companies linked to the President and his family, such as World Liberty Financial, from participating in the partnership program.
This would allow the partnership to identify consensus AML standards for DeFi and develop consistent technological controls that satisfy Bank Secrecy Act (BSA) requirements. Upon conclusion of the partnership, the Financial Crimes Enforcement Network (FinCEN) would be required to promulgate a rulemaking to establish tailored anti-money laundering and sanctions compliance requirements for DeFi entities that meet the goals of the BSA.
Text of the legislation can be found here.
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