Last week, the U.S. Commodities and Futures Trading Commission (CFTC) cracked down on three DeFi firms for illegal trading of crypto derivatives. As per the regulator, these platforms allowed the illegal trading of crypto derivatives without registering with the platform.
Coinbase chief Brian Armstrong has come out in support of DeFi protocols. In his recent message on Twitter, Armstrong said that the CFTC should refrain from initiating enforcement actions against decentralized (DeFi) protocols. These protocols do not operate as financial service businesses, and it’s doubtful that the Commodity Exchange Act even applies to them.
Ideally, these DeFi protocols should pursue legal action in court to establish a precedent. The judicial system has consistently shown a strong commitment to upholding the rule of law. The current course of action is primarily driving a vital industry towards offshore jurisdictions.
Along with Brian Armstrong, some lawmakers have also come in support of DeFi protocols. Republican Commissioner Summer Mersinger emphasized the need for the CFTC to prioritize providing clear regulations for DeFi instead of immediately resorting to enforcement actions.
She expressed her concern that the commission seems to be leaning towards enforcement actions when, in her view, engaging with the public and establishing clear rules should take precedence
Over the past few months, crypto firms have been facing the wrath of US regulators. In fact, regulators like the US SEC have also gone cracking down on some of the top players like Coinbase and Binance. Brian Armstrong is one of the leading crypto personalities and has been actively challenging regulatory actions.
On the other hand, the US government intensified its scrutiny of decentralized finance. In recent months, government agencies have introduced regulatory measures, imposed sanctions, and initiated enforcement actions to demonstrate heightened oversight and scrutiny of DeFi participants.
The US CFTC recently secured a victory against Ooki DAO for running an unlawful trading platform and violating other regulatory rules. In June, a federal judge also ruled in favor of the CFTC, ordering the shutdown of Ooki DAO and imposing a penalty exceeding $600,000.