The future of decentralized finance (DeFi) and decentralized exchanges (DEXs) may be headed for regulation in the United States, despite their nature as “just code,” says Commodity Futures Trading Commission (CFTC) chair Rostin Behnam. This raises questions about how the US will approach the rapidly growing world of DeFi.
Behnam suggests that the focus should not be on whether DeFi can be regulated, but rather on what US customers are being offered and who set up the exchange in the first place. He explains that US securities law already covers most digital assets, and legal precedent serves as the foundation for any legal analysis.
Some might view regulation as being at odds with DeFi’s nature of decentralization, while others argue that regulation could bring increased legitimacy and safeguard investors. The main conflict we can extract here lies in balancing the need for protection and transparency with the core values behind decentralized finance.
The responsibility for regulating DeFi would likely fall either to the CFTC or the Securities and Exchange Commission (SEC). This has raised questions about how digital assets should be categorized, with the SEC generally regulating the issuance and trading of securities, and the CFTC covering commodities and derivatives trading.
SEC chair Gary Gensler has previously stated that Bitcoin is a commodity, but has not gone into detail about the classification of other digital assets. Similarly, in a podcast interview, Behnam did not touch on individual digital assets, but asserted that cryptocurrency in general should be regulated like other financial assets.
Notably, Behnam emphasized the need to use the same playbook for cryptocurrency as past regulations: “For crypto, we have to use the same playbook that we have used in the past as we think about a policy that we construct.”
As the DeFi sector continues to grow, many stakeholders will be keeping a close eye on the regulatory landscape in the US. It will take time to see how these potential regulations develop, and whether they can achieve a balance between the ideals of decentralization and the need for investor protection.
In the meantime, the crypto community and regulators alike will need to navigate the challenge of determining how this relatively new technology and market fits within existing legal frameworks. And as with any new frontier, finding that balance may be easier said than done. Ultimately, the path towards regulation could prove to be a pivotal decision in determining the long-term success and adoption of decentralized finance and decentralized exchanges.
Source: Cryptonews
