The Escalating Cryptocurrency Crackdown in the U.S.
In the United States, the crackdown on digital currencies seems 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 3 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.
Additionally, the two DeFi entities were charged with failing to register as designated contract markets (DCMs) or swap execution facilities (SEFs). It was realized that they operated facilities that provided trading and swap processing services in violation of the law.
Illegal Leveraged and Margined Transactions
All 3 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 could 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 United States individuals to trade digital asset derivatives,” stated CFTC Director of Enforcement Ian McGinley.
A Cease-and-Desist Order and Penalties
The CFTC has announced a cease-and-desist order to Opyn, ZeroEx, and Deridex, instructing them to stop violating CFTC regulations and the Commodities Exchange Act (CEA). In addition, 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 likewise includes the settlement of the largest Bitcoin (BTC) 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 outlines the significance of regulatory compliance in the decentralized finance space. It serves as a reminder that despite the fact that the DeFi industry could 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 United States 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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