Why the CFTC Legal Actions Could Make DeFi Illegal in the US
![CFTC Throws Book at South African Bitcoin Trading Firm CEO, Imposes $3.4B Fine](https://coinmetanews.com/wp-content/uploads/2023/04/CFTC-Wins-Highest-Civil-Monetary-Penalty-in-Bitcoin-Fraud-Case.jpg)
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Amid the rising dominance and popularity of decentralized finance (DeFi), the Commodity Futures Trading Commission (CFTC) has intensified its regulatory lens on digital asset companies operating in the United States.
The CFTC issued simultaneous orders filing and settling charges against three notable DeFi firms: Opyn, ZeroEx, and Deridex.
CFTC Actions Signal a DeFi Ban in the US
The primary charges against Deridex and Opyn center around their failure to register as a swap execution facility (SEF) or designated contract market (DCM). Further, these DeFi protocols have been found negligent in adopting a customer identification program in alignment with the Bank Secrecy Act.
Likewise, ZeroEx joins the trio in facing allegations of unlawfully offering leveraged and margined retail commodity transactions in digital assets.
These DeFi companies are central players in the crypto market. They employ blockchain-based software protocols and smart contracts akin to trading platforms. Their proposition to users is the ability to execute transactions in a decentralized environment.
Read more: Top 6 DeFi Lending Platforms
![Top DeFi Platforms by Trading Volume](https://s32659.pcdn.co/wp-content/uploads/2023/09/Screenshot-2023-09-08-at-5.46.31-PM-850x848.png)
Still, as the recent charges suggest, employing cutting-edge technology does not exonerate them from regulatory scrutiny.
“Somewhere along the way, DeFi operators got the idea that unlawful transactions become lawful when facilitated by smart contracts. They do not. The DeFi space may be novel, complex, and evolving, but the Division of Enforcement will continue to evolve with it and aggressively pursue those who operate unregistered platforms that allow US persons to trade digital asset derivatives,” said Director of Enforcement Ian McGinley.
The orders mandate Opyn, ZeroEx, and Deridex to settle civil monetary fines amounting to $250,000, $200,000, and $100,000, respectively. Additionally, these DeFi protocols must halt further breaches of the Commodity Exchange Act (CEA) and CFTC guidelines.
Read more: CeFi vs. DeFi: Everything You Need To Know
Gabriel Shapiro, general counsel at Delphi Labs, weighed in, emphasizing a cautious approach for other DeFi protocols.
“If you run any kind of interface for a DeFi credit protocol, block the US. Many people told me I was crazy when I said that the CFTC’s case against OokiDAO simply makes DeFi illegal under the CFTC’s view of US law. I was right–they were wrong,” Shapiro said.
This case may pave the way for a more stringent regulation environment for DeFi in the US.
Therefore, other firms in the DeFi sector must rethink their operational strategies.
Disclaimer
In adherence to the Trust Project guidelines, BeInCrypto is committed to unbiased, transparent reporting. This news article aims to provide accurate, timely information. However, readers are advised to verify facts independently and consult with a professional before making any decisions based on this content.
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