Coinbase CEO Brian Armstrong cautioned the United States Commodities and Futures Trading Commission (CFTC) to avoid taking enforcement actions against (DeFi) protocols.
Coinbase CEO Brian Armstrong has expressed his endorsement of decentralized finance (DeFi) protocols. In a recent social media post, Armstrong urged the DeFi protocols to consider legal proceedings in court to set a precedent, as the legal system has consistently demonstrated its dedication to upholding the rule of law. The current approach is mainly pushing a crucial industry toward overseas jurisdictions, he said.
According to his post on X (formerly Twitter), the United States Commodities and Futures Trading Commission (CFTC) should avoid taking enforcement actions against (DeFi) protocols, as they do not function as conventional financial service businesses, and it’s questionable whether the Commodity Exchange Act is even applicable to them.
The CFTC should not be creating enforcement actions against decentralized (DeFi) protocols. These are not financial service businesses, and it’s highly unlikely the Commodity Exchange Act even applies to them.
My hope is these DeFi protocols take these cases to court to…
— Brian Armstrong ️ (@brian_armstrong) September 13, 2023
In the previous week, the U.S. CFTC took action against three DeFi companies for engaging in alleged unauthorized trading of cryptocurrency derivatives. According to the regulator, these platforms enabled the illicit trading of crypto derivatives without the necessary registration.
In addition to Brian Armstrong, certain legislators have also shown their backing for DeFi protocols. Republican Commissioner Summer Mersinger underscored the importance of the CFTC concentrating on establishing transparent regulations for DeFi, rather than swiftly resorting to enforcement measures. She voiced her apprehension that the commission appears to be leaning towards enforcement actions, whereas she believes that engaging with the public and setting clear guidelines should be the primary focus.
The U.S. CFTC recently achieved a legal triumph in a case against Ooki DAO for operating an illicit trading platform and contravening other regulatory guidelines. In June 2023, a federal judge similarly ruled in favor of the CFTC, resulting in the closure of Ooki DAO and the imposition of a fine exceeding $600,000.
In recent months, cryptocurrency companies have encountered increased scrutiny from U.S. regulatory authorities. Notably, regulatory bodies like the U.S. SEC have initiated investigations into major players such as Coinbase and Binance.