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Has DeFi Become Illegal in the US? CFTC Case Against Opyn, ZeroEx, Deridex Suggests So

2 mins
Updated by Ali Martinez
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In Brief

  • Commodity Futures Trading Commission intensifies regulatory scrutiny on US-based DeFi firms, settling charges against Opyn, ZeroEx, and Deridex.
  • Companies face allegations of failing to adhere to the Bank Secrecy Act and unlawfully offering leveraged commodity transactions in digital assets.
  • The stringent actions hint at a tighter regulatory framework, prompting DeFi firms to reevaluate their operational approaches in the United States.
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Amid the rising dominance and popularity of decentralized finance (DeFi), the Commodity Futures Trading Commission (CFTC) has intensified its regulatory lens on digital asset companies operating in the United States.

The CFTC issued simultaneous orders filing and settling charges against three notable DeFi firms: Opyn, ZeroEx, and Deridex.

CFTC Actions Could Make DeFi Illegal in the US

The primary charges against Deridex and Opyn center around their failure to register as a swap execution facility (SEF) or designated contract market (DCM). Further, these DeFi protocols have been found negligent in adopting a customer identification program in alignment with the Bank Secrecy Act.

Likewise, ZeroEx joins the trio in facing allegations of unlawfully offering leveraged and margined retail commodity transactions in digital assets.

These DeFi companies are central players in the crypto market. They employ blockchain-based software protocols and smart contracts akin to trading platforms. Their proposition to users is the ability to execute transactions in a decentralized environment.

Read more: Top 6 DeFi Lending Platforms

Top DeFi Platforms by Trading Volume
Top DeFi Platforms by Trading Volume. Source: CoinGecko

Still, as the recent charges suggest, employing cutting-edge technology does not exonerate them from regulatory scrutiny.

“Somewhere along the way, DeFi operators got the idea that unlawful transactions become lawful when facilitated by smart contracts. They do not. The DeFi space may be novel, complex, and evolving, but the Division of Enforcement will continue to evolve with it and aggressively pursue those who operate unregistered platforms that allow US persons to trade digital asset derivatives,” said Director of Enforcement Ian McGinley.

The orders mandate Opyn, ZeroEx, and Deridex to settle civil monetary fines amounting to $250,000, $200,000, and $100,000, respectively. These DeFi protocols must also halt further breaches of the Commodity Exchange Act (CEA) and CFTC guidelines.

Gabriel Shapiro, general counsel at Delphi Labs, weighed in, emphasizing a cautious approach for other DeFi protocols.

“If you run any kind of interface for a DeFi credit protocol, block the US. Many people told me I was crazy when I said that the CFTC’s case against OokiDAO simply makes DeFi illegal under the CFTC’s view of US law. I was right–they were wrong,” Shapiro said.

Read more: CeFi vs. DeFi: Everything You Need To Know

This case may pave the way for a more stringent regulation environment for DeFi in the US. Therefore, other firms in the DeFi sector must rethink their operational strategies.

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Bary Rahma
Bary Rahma is a senior journalist at BeInCrypto, where she covers a broad spectrum of topics including crypto exchange-traded funds (ETFs), artificial intelligence (AI), tokenization of real-world assets (RWA), and the altcoin market. Prior to this, she was a content writer for Binance, producing in-depth research reports on cryptocurrency trends, market analysis, decentralized finance (DeFi), digital asset regulations, blockchain, initial coin offerings (ICOs), and tokenomics. Bary also...
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