The U.S. Treasury is considering embedding digital identity verification mechanisms in DeFi protocols

ChainCatcher news, according to Cointelegraph, the U.S. Treasury has initiated a public consultation under the GENIUS Act, proposing to explore the integration of digital identity verification tools in DeFi smart contracts to combat illegal financial activities. The proposal includes the automatic execution of KYC/AML checks on-chain via API interfaces, while employing technologies such as biometrics to reduce compliance costs.

Banking groups have warned that if there are regulatory loopholes in stablecoin interest payments, it could lead to a $6.6 trillion outflow of bank deposits. The public consultation will continue until October 17, 2025, after which the Treasury will submit a report to Congress and may introduce new regulations.