• CFTC Chair Rostin Behnam has clarified that DeFi applications must follow all financial rules on the books.
• He suggested that the agency will probe into who is behind DeFi apps to make sure they comply with regulations.
• This raises questions about how US government agencies will enforce regulations on autonomous, non-compliant DeFi platforms.
CFTC Clarifies Stance on DeFi
The Commodity Futures Trading Commission (CFTC) Chairman, Rostin Behnam, has clarified the agency’s stance on decentralized finance (DeFi). He stated that despite its anonymity and self-executing nature, developers and investors behind Decentralized Finance (DeFi) applications must comply with all financial regulations.
Regulators Will Probe Into Who Is Behind DeFi Apps
Behnam suggested that the agency will probe into who is behind DeFi apps to ensure compliance with regulatory requirements. He explained that the real question is what these protocols do and who ultimately runs them – “It’s really about what are U.S. customers being offered and exposed to,” he said. “And who is either the individual or group of individuals who set up that entity, that code, to offer those products?”
Enforcement Of Regulations On Autonomous Platforms
The CFTC’s stance raises questions about how it will enforce regulations on autonomous, non-compliant DeFi platforms as there is a lack of consensus among US government agencies over which agency has jurisdiction over crypto assets. The Securities and Exchange Commission (SEC) Chair Gary Gensler claims all crypto assets except Bitcoin are securities; however this conflicts with CFTC’s jurisdiction in some cases.
Competition Among Regulators
Complicating matters further is the competition between different regulators for jurisdiction over decentralized finance projects which could lead to conflicting rulings or interpretations of laws. As such, it remains unclear how regulators would enforce their respective rulings if one regulator were to rule in favor of a project while another regulator had ruled against it in a different case involving similar technology or functionalities.
Conclusion
It appears clear from Behnam’s remarks that regardless of whether an application operates autonomously or not, developers and investors behind these projects must comply with relevant financial rules set by US regulation bodies such as the CFTC and SEC. As such, this poses an interesting challenge for both regulators as well as developers – how best to navigate through this complex web of laws while still maintaining compliance?