Let’s call them for what they are: Social Credit systems.
We know that “CBDC” stands for Central Bank Digital Currencies – and we have long held our hypothesis on what those entail (the TL;DR is that they will either launch as, or morph into, China-style social credit systems).
We’ve seen an Executive Order expressly ruling out CBDCs in the US, but as I keep warning readers: we’re seeing components we’d expect to see under a CBDC system appearing – only they aren’t originating at The Fed (who has never really expressed an interest in them, anyway).
Now the US Treasury Department is seeking comments on Digital ID as it relates to DeFi:
“The Department of the Treasury has filed a request for public comments to provide input on the use of “innovative or novel methods to detect and mitigate illicit finance risks involving digital assets” in accordance with the GENIUS Act, as well as in accordance with Donald Trump’s policy to support “the responsible growth and use of digital assets,” as outlined in the President’s Executive Order to strengthen US leadership in digital financial technology.”
The areas covered range from:
“the use of APIs “to help enforce strict access controls, monitor transactions and activities, and bolster security and integrity of financial institutions providing digital asset services”, the use of Artificial Intelligence to “make predictions, recommendations or decisions” to “effectively identify illicit finance patterns, risks, trends, and typologies”, and blockchain monitoring to “evaluate high-risk counterparties and activities, analyze transactions across multiple blockchains,trace or monitor transaction activities, and identify patterns that indicate potential illicit transactions.”
As well as Digital ID (which I think is the catch-phrase we’re going to see a lot of in the future, that will capture a lot of the objectives of CBDCs)
“the treasury is also seeking comments on the introduction of “portable digital identity credentials designed to support various elements of AML/CFT and sanctions compliance, maximize user privacy, and reduce compliance burden on financial institutions” to potentially be used “by decentralized finance (DeFi) services’ smart contracts to automatically check for a credential before executing a user’s transaction.”
Sounds similar to what the Bank of International Settlements (BIS) wants to do in terms of rating individual crypto wallets for AML compliance.
In a white paper titled An approach to anti-money laundering compliance for cryptoassets they propose to:
“leverag[e] the provenance and history of any particular unit or balance of a cryptoasset, including stablecoins”
In order to assign an “AML compliance score”.
Hellbound and Down 