The Escalating Crypto Crackdown in the U.S.
In the United States, the crackdown on cryptocurrencies appears to be intensifying, as demonstrated by the recent actions taken by the Commodity Futures Trading Commission (CFTC).
On September 7, the CFTC, which oversees the derivatives market, brought charges against three prominent decentralized finance (DeFi) entities: Opyn, Inc., ZeroEx, Inc., and Deridex, Inc. These entities are all registered in Delaware.
Multiple Violations of Registration
The CFTC has accused Deridex and Opyn of not registering as futures commission merchants (FCMs) when they deployed their blockchain protocols and encouraged users to deposit assets into smart contracts involving leveraged retail commodity transactions.
In addition, the two DeFi entities were charged with failing to register as designated contract markets (DCMs) or swap execution facilities (SEFs). It was discovered that they operated facilities that provided trading and swap processing services in violation of the law.
Illegal Leveraged and Margined Transactions
All three entities, Opyn, ZeroEx, and Deridex, were accused of illegally offering leveraged and margined retail commodity transactions involving digital assets.
“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 U.S. persons to trade digital asset derivatives,” said CFTC Director of Enforcement Ian McGinley.
A Cease-and-Desist Order and Penalties
The CFTC has issued a cease-and-desist order to Opyn, ZeroEx, and Deridex, instructing them to stop violating CFTC regulations and the Commodities Exchange Act (CEA). Additionally, they have been ordered to pay civil monetary penalties of $250,000, $200,000, and $100,000, respectively.
Ongoing Enforcement Actions
This recent development on September 7 is part of an ongoing series of enforcement actions taken by the CFTC, which also includes the settlement of the largest Bitcoin forex fraud case in the history of the derivatives market.
Hot Take: The Importance of Compliance in the DeFi Space
The CFTC’s crackdown on these DeFi entities highlights the significance of regulatory compliance in the decentralized finance space. It serves as a reminder that even though the DeFi industry may be innovative and rapidly evolving, operators cannot disregard established regulations. The CFTC’s Division of Enforcement will continue to adapt and vigorously pursue unregistered platforms that enable U.S. individuals to trade digital asset derivatives. Compliance with registration requirements and adherence to the law are essential in ensuring the legitimacy and longevity of the DeFi sector.
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