CFTC believes DeFi projects are breaking the law

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Decentralized finance (DeFi) projects may violate the Commodity Exchanges and Trading Act (CEA). This opinion was expressed by Dan Berkowitz, Commissioner of the Commodity Futures Trading Commission (CFTC). An unregulated DeFi market is a bad idea, he said.

 

“Not only do I think unlicensed DeFi markets are a bad idea, I also don’t understand how they can exist under the CEA,” Berkowitz said.

 

According to the CFTC Commissioner, the law contains no exceptions for either cryptocurrencies or smart contracts. Berkowitz believes DeFi is undermining the US’s status as a strong financial system due to lack of regulation.

Moreover, the CFTC Commissioner considers it undesirable to create competition between unregulated and regulated derivatives markets. Such competition, according to Berkovits, leads regulated markets to take on either more risks to raise revenues, or to seek less regulation in order to level the playing field.

At the same time, Berkovits stressed that the commissions together with other regulators, more attention should be paid to “this growing area of ​​concern”.

Mike Novogratz, the head of Galaxy Digital, also spoke about the risks of the DeFi market for large players. According to him, institutions are in no hurry to enter the DeFi market due to its excessive anonymity. Novogratz believes that anonymity promises problems with the regulator, and institutions want to avoid this. However, according to him, the solution to this problem is not far off.

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