Timechain one of the First Licensed DEX Aggregator brings Compliance to Fantom, BSC and Ethereum

Compliance comes to DeFi - A Game Changer

Currently, none of the DEXs such as Uniswap, Sushiswap, Pancakeswap are regulated by any regulator in any part of the world; compliance is non-existent in DeFi the wild wild west. Timechain, a Canadian registered Money Services Business (MSB) through TimeSwap, a decentralized exchange aggregator and permissionless lending and borrowing protocol actively regulated by Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) and AMF released the first compliant Automated Market Maker (AMM) liquidity pools, yield farming and staking functionality.

In the DeFi industry, compliance implies that participants follow the same standards as traditional financial services. The regulations governing capital markets and the overall financial industry vary by state and government, but they are divided into three categories: Know Your Customer (KYC), Anti Money Laundering (AML), and Countering Terrorism Financing (CFT).

DeFi’s main selling point is its connection to blockchain technology, promoting decentralization. As a result, DeFi activities are also permissionless, in contrast to the existing system, which needs potential users to pass through a slew of regulatory verification procedures before they can engage in the global economy.

Due to the fact that DeFi initiatives allow users to join and exit at their leisure, compliance has been a problem. They’re also resistant to censorship, which makes compliance even more difficult.

In the DeFi area, compliance implies that applications must follow KYC, AML, and CFT requirements, impacting users and enabling collaboration with traditional financial institutions. Furthermore, adhering to standard financial regulatory rules can lead to widespread adoption and help a more significant number of individuals.

Staking, yield farming, and liquidity provisioning are all necessary elements for a successful DEX since they let users earn passive income while safeguarding the network and confirming transactions.

How does regulated DEX work?

The new liquidity pools reward users that offer liquidity to the DEX with fees produced by transactions on the platform, as well as LP tokens that may be put into farming pools for extra rewards. Users contribute liquidity to existing pools by exchanging equal amounts of the two tokens in the pair for LP tokens, which represent their share of the liquidity pool. The LP tokens generate fees equal to each user’s pool share, and they may be redeemed at any moment.

DeFi Compliance - The Future of Exchanges

According to the FATF report, the use of anonymous tools and procedures is on the rise, making it difficult to discover unlawful financial operations such as fraud and money laundering.

The DeFi business cannot expect a free ride when it comes to compliance and should expect to be held to the same standards as traditional financial institutions. If a DEX trades equities (or tokens representing stocks), it must adhere to the same security rules and regulations as stock exchanges. A DeFi payments firm should also check the rules governing money service businesses.

Effective KYC checks are a standard regulatory need across all financial industries. Any DeFi protocol that allows financial transactions without requiring identity verification is a potential magnet for criminally contaminated monies derived from bribery and corruption, fraud, ransomware, drugs, and terrorism.

Simply said, regulators will not allow these loopholes for criminals to move money, and any company that facilitates such operations will be subject to heavy penalties, including fines, sanctions, or outright bans. Starting with the present regulatory criteria is a sensible step for organizations that wish to contribute to the sector’s long-term growth and participate in the next phase of the fintech revolution.

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