The Commodity Futures Trading Commission (CFTC), a regulatory body in the US, is adopting a financial surveillance system developed by Nasdaq to modernize its outdated 1990s infrastructure.
According to Tony Sio, head of regulatory strategy and innovation at Nasdaq, the software is designed to identify market abuses, such as insider trading and market manipulation in equities and cryptocurrency markets. He stated:
“Custom algorithms pinpoint suspicious patterns specific to digital asset markets, providing real-time analysis of order book data across crypto trading platforms and enabling cross-market analytics to link activities between traditional and digital asset markets.”
The data integrated into the monitoring system will be “obtained by the CFTC through its regulatory authority,” Sio noted.
Financial surveillance remains a contentious topic in the crypto space, with privacy advocates warning that such scrutiny could create a digital “prison,” while others argue that anti-money laundering measures are crucial for the institutional adoption of cryptocurrencies.
Related: The US Treasury’s DeFi ID initiative is akin to installing cameras in every living room
DeFi sector growing increasingly wary of surveillance
The US Treasury is considering implementing mandatory digital identification checks within decentralized finance (DeFi) smart contracts to address illegal financial activities.
Combating illegal finance was one of the key directives outlined in the White House’s crypto report from July, which also included propped-up tax and market structure proposals for digital assets in the US.
The White House report advised that the Treasury Department, along with the National Institute of Standards and Technology (NIST), develop enhanced know-your-customer (KYC) standards for digital assets.
The report also called for updates to the current NIST digital identity guidelines and a revamping of identity credential tools.
Critics argue that integrating such tools into DeFi protocols undermines the foundational principles of permissionless and decentralized architecture.
“Transforming a neutral, permissionless infrastructure into one where access relies on government-approved identity credentials fundamentally alters the essence of what DeFi is supposed to represent,” said Mamadou Kwidjim Toure, CEO of investment platform Ubuntu Tribe, in a statement to Cointelegraph.
Magazine: Can privacy endure in US crypto policy following Roman Storm’s conviction?
