Coinbase CEO Brian Armstrong vehemently opposes the United States Commodity Futures Trading Commission (CFTC) taking legal action against decentralized finance (DeFi) protocols. He is concerned about the potential loss of industry strength for the nation.
Armstrong urges DeFi protocols not to settle and instead, to pursue these cases in court to set a precedent, as he contends that the claims lack substance.
Brian Armstrong: CFTC Action May Hamper US Economy
Armstrong expressed in a statement shared on X (formerly Twitter) on September 13 that the possibility of the CFTC taking action against DeFi protocols appears unlikely.
“These are not financial service businesses, and it’s highly unlikely the Commodity Exchange Act even applies to them.”
Armstrong states that his hope “is these DeFi protocols take these cases to court to establish precedent.”
He noted the court’s ability to take an unbiased stance toward the industry:
“The courts have proven to be very willing to uphold rule of law.”
This comes amid the CFTC’s issuance of simultaneous orders and settlements against three notable DeFi firms: Opyn, ZeroEx, and Deridex.
Deridex and Opyn were charged with not registering as a swap execution facility (SEF) or designated contract market (DCM). Both also failed to implement a customer identification program as required by the Bank Secrecy Act.
ZeroEx was charged with offering illegal leveraged retail commodity transactions in digital assets
Concerns Arise About the Expense of Battling US Regulators
Armstrong cautions that heightened enforcement efforts could potentially drive the DeFi industry to relocate offshore.
Most of Armstrong’s followers agreed with him in their comments. However, some raised doubts about the feasibility of pursuing a battle over a settlement with the US regulator.
“A lot of the projects don’t have funds to fight the SEC and end up having to settle,” one user stated.
Another user proposed creating a dedicated fund for added support. “How about set up a legal defense fund for small projects?” the user asked.
The expense incurred by crypto firms in their legal battles against US regulators has become a prominent topic of discussion. Brad Garlinghouse, CEO of Ripple, recently revealed that Ripple’s legal dispute with the SEC may have amounted to over $200 million in legal fees.
Ripple scored a partial victory on July 13. The ruling stated that Ripple’s native token, XRP, is not a security for retail sales. However, the SEC has filed an appeal against the ruling. This raises the possibility that Ripple may face an increase in its legal fees.
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