The Commodity Futures Trading Commission (CFTC), a U.S. regulatory body, is implementing a financial surveillance tool created by stock exchange firm Nasdaq to modernize its outdated infrastructure from the 1990s.
According to Tony Sio, Nasdaq’s head of regulatory strategy and innovation, the software aims to identify market abuses such as insider trading and manipulation within both equities and crypto markets. He noted:
“Customized algorithms identify suspicious patterns specific to digital asset markets. It provides real-time analysis of order book data across crypto trading platforms and cross-market analytics that can link activities between traditional and digital asset markets.”
The monitoring system will utilize data “sourced by the CFTC through their regulatory authorities,” Sio stated.
Financial surveillance remains a contentious topic in the crypto sphere, with privacy advocates claiming that such monitoring paves the way for a digital “prison,” while others argue that anti-money laundering measures are essential for fostering institutional acceptance of crypto.
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DeFi sector increasingly apprehensive about surveillance
The U.S. Treasury Department is considering the introduction of digital identification checks integrated into decentralized finance (DeFi) smart contracts to prevent illegal financial transactions.
Combating illicit finance was one directive outlined in the White House’s crypto report from July, which also encompassed tax and market structure proposals for digital assets within the U.S.
The White House report suggested that the Treasury Department and the National Institute of Standards and Technology (NIST) create additional Know Your Customer (KYC) standards for digital assets.
The report also advocated for revisions to existing NIST digital identity guidelines and an overhaul of identity credentialing tools.
Critics of these suggestions assert that implementing such tools in DeFi protocols undermines the foundational principles of permissionless, decentralized structures.
“Transforming a neutral, permissionless framework into a system where access is controlled by government-sanctioned identity credentials fundamentally alters what DeFi is intended to be,” stated Mamadou Kwidjim Toure, CEO of investment platform Ubuntu Tribe, in a conversation with Cointelegraph.
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