Three decentralized finance (DeFi) operations, Deridex, ZeroX, and Opyn, have been targeted by the US Commodity Futures Trading Commission (CFTC) for charges related to the offering of illegal derivatives trading. The CFTC alleges that these platforms failed to register as swap execution facilities (SEFs) or designated contract markets (DCMs) and also failed to register as futures commission merchants (FCMs). They were also accused of not adopting a customer identification program as part of a Bank Secrecy Act compliance program, as required by FCMs.
Furthermore, the CFTC charged ZeroEx, Opyn, and Deridex with illegally offering leveraged and margined retail commodity transactions in digital assets.
As a result of these charges, Opyn, ZeroEx, and Deridex have been ordered to pay civil monetary penalties of $250,000, $200,000, and $100,000, respectively. They have also been issued cease and desist orders, which demand that these DeFi operators refrain from violating the Commodity Exchange Act (CEA) and CFTC regulations.
Ian McGinley, the Director of Enforcement at the CFTC, stated that the Division of Enforcement will aggressively pursue those who operate unregistered platforms allowing US individuals to trade digital asset derivatives. McGinley emphasized that while the DeFi space is novel and complex, the CFTC will adapt and continue to evolve with it.
In response to the charges, Chris Perkins, President and Managing Partner at CoinFund and member of the Global Markets Advisory Committee and the Digital Assets Markets Subcommittee of the CFTC, expressed his belief that engagement and dialogue, followed by clear and consistent rule-making supported by proactive legislation, is the most effective approach to responsible innovation. Perkins argues that punishing DeFi pioneers without clear rules is detrimental to American competitiveness and calls for a principles-based approach to digital asset policy.
Perkins was not alone in criticizing the CFTC’s enforcement action. CFTC Commissioner Summer K. Mersinger publicly dissented against the charges, characterizing them as heavy-handed. Mersinger emphasized that a regulation-by-enforcement regime would stifle innovation and result in the banishment of innovation from the US.
These charges against DeFi providers highlight the growing regulatory scrutiny in the decentralized finance sector and the need for clearer guidelines and regulations to promote responsible innovation in the digital asset space.
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