In a thrust toward determining legal boundaries within the cryptocurrency space, Coinbase CEO, Brian Armstrong, has recently urged decentralized finance (DeFi) protocols to consider taking legal action. Armstrong’s call aims to construct a legal precedent given that the current judicial system has demonstrated their firm commitment to upholding the rule of law. Armstrong states that the current approach incumbently propels the critical crypto industry towards foreign jurisdictions.
In a post on formerly known Twitter platform, Armstrong alerted the United States Commodities and Futures Trading Commission (CFTC) to refrain from mandating enforcement actions on DeFi protocols. Armstrong asserts that these protocols do not operate in the same vein as traditional financial service establishments. He also challenges whether the Commodity Exchange Act could even be employed to them.
Armstrong’s admonition arises in the aftermath of the recent action by the CFTC against three DeFi companies. These firms were accused of unauthorized trading of cryptocurrency derivatives. According to the regulatory body, these platforms facilitated illicit trading of crypto derivatives without requisite registration.
Armstrong is not alone in his advocacy for DeFi protocols. Certain legislators have also demonstrated their support notably Republican Commissioner, Summer Mersinger who emphasises that the CFTC should be focused on establishing clear regulations for DeFi rather than hastily taking enforcement actions. Drawn from her perspective, engaging the public and setting the rules of engagement should be the priority as opposed to rushing into punitive actions.
The CFTC’s recent legal victory in the case against Ooki DAO for contravening regulatory guidelines and operating an illegal trading platform has compounded the seriousness of regulatory overreach. This culminated in the closure of Ooki DAO and a hefty fine north of $600,000.
Recent times have seen crypto companies come under enhanced scrutiny from U.S. regulatory bodies, with dominant players like Coinbase and Binance being investigated. While legal action can in some instances set precedent and perhaps lead to clear, justifiable regulation, a pertinent question arises. How much of this, by way of enforcement, may inhibit innovation and growth in the same industry it intends to protect?
Source: Cointelegraph
