DeFi has been criticized for denying access to users based on the contents of their wallets

Key points: 

• There is criticism of DeFi for denying users access based on wallet information. 
• 1inch chief communications officer Sergey Maslennikov told that restricting wallets is part of their efforts to create a safe and compliant community environment.
• Financial Action Task Force recently found that countries that ignore crypto anti-money laundering rules could be put on the regulator’s grey list.

While Decentralized Finance (DeFi) promises to be an upgrade to traditional financial mechanisms, some believe that denying users access to decentralized exchanges based on wallets is a step backward.

In a tweet, entrepreneur Brad Mills criticized DeFi for denying users access to decentralized exchanges (DEXs) based on various factors including location and wallet content. Because of this, Mills describes the future of Web3 as a "surveillance panopticon," saying it recreates everything Wall Street was wrong, but on the blockchain. In the tweet, Mills also shared an image of 1inch Network's decentralized application (DApp) pop-up message that restricts access based on the wallet address used.

1inch chief communications officer Sergey Maslennikov told that restricting wallets is part of their efforts to create a safe and compliant community environment. Maslennikov explained:

“Users’ wallets which are owned or associated with clearly illegal behavior like: sanctions, terrorism financing, hacked or stolen funds, human trafficking, and child sexual abuse material (CSAM) are prevented from interacting with the 1inch dApp.”

According to Maslennikov, DeFi aggregators comply with all applicable sanctions and embargo lists. In addition to this, DEX also complies with anti-money laundering (AML) and terrorist financing prevention regulations and the efforts of the international community.

Meanwhile, the Financial Action Task Force (FATF) recently found that countries that ignore crypto anti-money laundering rules could be put on the regulator’s grey list, which is under scrutiny. There are currently 23 countries on the list, including crypto hubs such as the United Arab Emirates and the Philippines.

Regarding terrorist financing, a United Nations (UN) official highlighted that terrorists are still using cash instead of cryptocurrencies.  While cash remains the primary method of financing terrorism, terrorists are able to adapt to new technologies, including cryptocurrencies, Financing Coordinator of United Nations Counter-Terrorism, Svetlana Martynova, told a special session.