Three prominent decentralized finance (DeFi) protocols have found themselves at the center of a recent regulatory squabble. The U.S. derivatives markets regulator, CFTC, has slapped charges on DeFi protocols: Opyn, (0x), and Deridex for indulging in illegal derivatives trading through blockchain-based protocols and smart contracts.
The regulatory body asserts that these smart contract-based transactions fail to fall within the jurisdiction of lawful activities. In the eyes of the Commission, the utilization of these digital mediums as trading platforms is a stark violation of regulated practices. The three companies involved have been slapped with hefty fines, with Opyn facing the highest penalty amount. Despite these fines, the companies made the calculated choice to accept the ceasefire terms – a move purposed to quickly resolve the impending charges.
The CFTC’s attention to ZeroEx comes off as no surprise owing to its connection with Jason Somensatto, who was associated with 0x Labs before his stint in CFTC’s technology research division. The central accusation on all three companies rotates around the illegal offering of leverage and retail transactions using digital assets.
Opyn faces more charges for its failure to adequately register as a swap execution facility, designated contract market, and a futures commission merchant. This contention is intensified by Opyn’s further disregard toward the constitution of customer identification programs that align with Bank Secrecy Act parameters. Deridex, a North Carolina-based protocol, also finds itself amidst similar regulatory wrangles.
Despite the looming charges, all three firms are reported to exhibit a cooperative demeanor during the CFTC’s investigation. This, it was assumed that led to a decrease in the magnitude of imposed financial penalties. An associated account with the 0x app Matcha declared that both 0x and Matcha continue their business operations without any hindrance.
However, not all members of the CFTC agreed with the enforcement action against the DeFi protocols. CFTC Commissioner Summer Mersinger raised doubts about their approach: the apparent absence of any harm or loss to customers posed a question mark on the necessity of these punitive measures. She advocated for more open dialogue with the public in situations where hard evidence of illegal activity is not immediate or apparent.
What’s inevitable is a closer look at how these protocols continue their operation and what this implies for future DeFi bodies in controversies such as this. Will cooperation with regulatory bodies be perceived as a more tangible solution or simply a temporary band-aid overlaid on a yet-to-heal wound inflicted by regulatory ambiguity? These are the questions we may need to explore as we eye the development of DeFi space closely.
Source: Cryptonews
