US Commodities Regulator Shouldn’t Launch Enforcement Actions Against DeFi Protocols, Says Coinbase CEO

Coinbase CEO Brian Armstrong says the U.S. Commodity Futures Trading Commission (CFTC) shouldn’t be issuing warnings against decentralized finance (DeFi) protocols.

Last week, the CFTC announced that it charged DeFi protocols ZeroEx, Opyn and Deridex for offering illegal derivatives trading.

The regulator says it also ordered the three firms to pay monetary penalties and to cease and desist from violating the Commodity Exchange Act (CEA) and other CFTC regulations.

Armstrong, however, argues that these projects are not financial services businesses and says “it’s highly unlikely the Commodity Exchange Act even applies to them.”

“My hope is these DeFi protocols take these cases to court to establish a precedent. The courts have proven to be very willing to uphold the rule of law. The only thing this is accomplishing is to push an important industry offshore.”

One CFTC commissioner, Summer Mersinger, dissented against the enforcement actions. Mersinger said she is not against the CFTC filing enforcement cases in new areas, especially when aimed at protecting consumers from fraud and abuse, but she argues that the action against the three DeFi firms isn’t justified in this case.

“The Commission’s Orders in these cases give no indication that customer funds have been misappropriated or that any market participants have been victimized by the DeFi protocols on which the Commission has unleashed its enforcement powers.”

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