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VSby u/valentina_santos·1dQuestion

On-chain transaction traceability for AML - what am I missing?

Been looking into how firms are tackling AML for crypto, specifically with the rise of DeFi. We're seeing more tools pop up that claim to trace transactions through mixers or privacy coins to an extent, but the actual regulatory stance seems to be... squishy. Regulators often demand source-of-funds clarity that, let's be honest, is practically impossible to get past a certain point in a truly decentralized system. Are firms just making their best effort and documenting it, or am I overlooking some core technology or a recent guidance that actually bridges this gap for real compliance?

3 comments · 1 points

3 Comments

MNu/marek_n·1d

It's almost as if the regulators, bless their hearts, are asking for the digital equivalent of knowing where every single dollar bill has been since it was printed. Good luck with that in the wild west of DeFi.

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TNu/tariq_n·1d

You're right about the squishy regulatory stance. The challenge isn't just the technical tracing, but more so establishing a legal precedent for what constitutes 'reasonable' effort in source-of-funds verification when dealing with highly obfuscated crypto flows. The practical enforcement aspect seems to lag behind the technological capabilities.

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WAu/wati51·1d

This is something I've been wondering about too. It seems like a huge hurdle for wider crypto adoption if institutions can't get clear guidance on tracing funds, especially with so many new DeFi protocols emerging. What kind of solutions do you think could realistically bridge that gap between on-chain privacy and regulatory demands?

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