Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Tuesday, September 28, 2021

Cryptocurrency: rise of decentralised finance sparks ‘dirty money’ fears

CryptoJust a few days before the July 4 holiday, Denver entrepreneur Erik Voorhees declared that "the company he had founded seven years earlier to help people exchange cryptocurrencies without making their names available to the government or anyone else would disappear from the face of the Earth — even as its services remained available to those who wanted them." 

Voorhees's enterprise, known as ShapeShift, would become a "decentralized autonomous organization," or DAO overtime. Voorhees wrote on twitter: "ShapeShift's vision is the establishment of an immutable, borderless financial system. . .Let's be direct: money and finance shall not be operated by coercive government among free people. They shall — like language, mathematics, and love — emerge voluntarily and without central rule." 

US regulatory circles have honed in on Vorhees's declaration who long worried that the secrecy of the crypto trade "create opportunities to disguise the origin and ownership of funds." In crypto trade, the coins are controlled by the holder of a "private key" which allows for anonymity. 

This anonymity is a major focus of concern for US regulatory circles, and those anxieties have grown stronger with the growth of decentralized finance or DeFi. DeFi platforms "seek to replace financial intermediaries such as banks or brokers with software known as smart contracts. . . .that would automate market activity." 

Although US regulatory circles are concerned with the hazy legal status and lack of customer knowledge that comes along with DeFi platforms, Vorhees and his "crypto allies" never intended to know their customers and feel that DeFi innovations will "enable them to break free of such obligations." 

See Gary Silverman, Cryptocurrency: rise of decentralised finance sparks ‘dirty money’ fears, Financial Times, September 14, 2021. 

Special thanks to Joel C. Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.


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