DeFi enforcement sparks dissenting opinion from CFTC commissioner
Commodity Futures Trading Commission (CFTC) Commissioner, Commissioner Summer K. Mersinger, has said that he is concerned that the United States CFTC is considering enforcement actions related to decentralized finance (DeFi) protocols rather than engaging with the public.
In a public statement issued on Sept. 7, the dissenting commissioner expressed his misgivings about the approach taken by the CFTC in these cases, arguing that enforcement actions are not the most suitable means of addressing novel DeFi technology. The commissioner believes that the CFTC should engage with the public and stakeholders through rulemaking and other regulatory tools instead of relying primarily on enforcement actions.
Mersinger said,
“I am concerned that the Commission in these cases is taking another step down the path of bringing enforcement actions when we should be engaging with the public.”
Mersinger expressed openness to applying CEA and CFTC rules to innovative situations, especially when necessary to protect market participants from fraud and abuse, in line with the congressional mandate. However, he noted that the Commission’s orders in these cases didn’t indicate any misappropriation of customer funds or victimization of market participants by the DeFi protocols subject to enforcement actions.
The commissioner raised questions about the regulatory jurisdiction over DeFi protocols, the need for clear rules and the potential consequences of enforcement in the absence of transparent rulemaking. Despite the challenges, the CFTC’s Spring 2023 regulatory agenda does not include any rulemaking activities related to DeFi, leaving these issues largely unaddressed.
Related: CFTC commissioner calls for crypto regulatory pilot program
The United States Commodity Futures Trading Commission announced that it is taking regulatory action against three decentralized finance protocols for allegedly failing to register various derivatives trading offerings. The exchanges are namely, Opyn Inc., ZeroEx Inc., and Deridex Inc.
Deridex and Opyn faced charges for not registering as a swap execution facility or designated contract market, as well as failing to register as a futures commission merchant. Additionally, the CFTC accused the two protocols of non-compliance with customer provisions outlined in the Bank Secrecy Act.
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