Brian Armstrong, the CEO of Coinbase, has issued a warning to the United States Commodities and Futures Trading Commission (CFTC), advising against taking enforcement actions targeting decentralized finance (DeFi) protocols.
In a recent statement on X (formerly Twitter), Armstrong voiced his support for DeFi protocols and encouraged them to pursue legal actions in court to establish legal precedents. He emphasized the consistent commitment of the legal system to uphold the rule of law and expressed concerns that the current approach could drive the DeFi industry to foreign jurisdictions.
Armstrong argued that the CFTC should refrain from taking enforcement actions against DeFi protocols, asserting that they operate differently from traditional financial service businesses, and there is uncertainty about whether the Commodity Exchange Act is applicable to them.
This statement comes in the wake of the CFTC’s recent enforcement actions against three DeFi companies, accusing them of engaging in unauthorized trading of cryptocurrency derivatives. According to the regulator, these platforms facilitated illicit trading of crypto derivatives without the requisite registration.
Brian Armstrong is not alone in his support for DeFi protocols. Some legislators, including Republican Commissioner Summer Mersinger, have also expressed their backing for DeFi. Mersinger emphasized the importance of the CFTC focusing on establishing transparent regulations for DeFi rather than immediately resorting to enforcement measures. She expressed concerns that the commission seems to be leaning toward enforcement actions when she believes that engaging with the public and establishing clear guidelines should be the primary priorities.
The recent legal victory of the U.S. CFTC against Ooki DAO, which was operating an illicit trading platform and violating regulatory guidelines, showcases the commission’s efforts in regulating the DeFi space. In June 2023, a federal judge ruled in favor of the CFTC, leading to the closure of Ooki DAO and imposing a fine exceeding $600,000.
In recent months, cryptocurrency companies have faced increased scrutiny from U.S. regulatory authorities. Notably, regulatory bodies such as the U.S. SEC have initiated investigations into major players like Coinbase and Binance. These developments underscore the ongoing regulatory challenges in the cryptocurrency industry.
