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CFTC Chairman Affirms Regulatory Authority over DeFi Platforms Offering Derivatives

2 mins
Updated by Geraint Price

In Brief

  • CFTC chairman stated that DeFi platform offering derivative services should register with the CFTC.
  • But how will the CFTC reach out to non-complying DeFi platforms?
  • While CFTC gave some clarification, the SEC is still unwilling to give clarity on crypto regulations.
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The Commodity Future Trading Commission (CFTC) chairman affirmed that decentralized finance (DeFi) platforms offering derivatives services would be regulated by the CFTC.

Despite various governments working on crypto regulations, the U.S. has yet to give signs of a specific regulatory framework.

CFTC Chair Wants to Regulate DeFi Code

CFTC chairman Rostin Behnam discussed crypto regulations at the Bloomberg Odd Lots podcast. DeFi mainly consists of smart contracts written by anonymous developers.

But according to the CFTC chair, if the DeFi products offer derivatives to U.S. customers, they would have to register with the CFTC. Behnam argued:

“It’s easy to suggest, Oh, there’s no institution, there’s no individual, it’s just code, you can’t regulate that, it’s sort of self-effectuating. But that’s really the wrong set of questions.

It’s really about what are U.S. customers being offered and exposed to? And who is either the individual or group of individuals who set up that entity, that code, to offer those products?”

He adds, “If you are going to offer derivatives to U.S. customers, there is a very well-developed, mature legal base and requirements for complying with the law.”

Today, a law firm gave a legal notice on-chain to anonymous meme coin developers through non-fungible tokens (NFTs). Will the CFTC also take the same approach against the parties not complying with the laws?

Behnam: Crypto Should Follow Playbook Similar to Traditional Finance

The CFTC chair believes the U.S. has a comprehensive regulatory system where each agency has a unique set of responsibilities.

When asked who should regulate crypto, Behnam said, “It really falls on what type of asset they are regulating. 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.”

While Behnam clarified that entities offering derivatives services need to register with CFTC, the Securities and Exchange Commission (SEC) is unwilling to clarify crypto regulations.

The chairman Gary Gensler believes that the rules for crypto regulations already exist.

Meanwhile, all 27 members of the European Union have approved the Market in Crypto-Assets (MiCA) legislation for crypto regulation.

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