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U.S. CFTC Commissioner Mentions DeFi Derivatives May Be Illegal in U.S.


CFTC Commissioner’s View

Dan Berkovitz, Commissioner of the US CFTC (Commodity Futures Trading Commission), which oversees and regulates the derivatives market, has pointed out that DeFi (decentralized finance) related markets may be illegal under US law.

In a statement related to asset management derivatives posted on the CFTC official website, Berkovitz Commissioner said that DeFi (decentralized finance) without an intermediary is no exception under federal law, and some DeFi derivative transactions (commodities) ) Etc. may have violated the “Commodity Trading Law”.

It should be noted that this refers only to the trading of derivative products in DeFi, and the general use of the DeFi platform in physical trading is not considered to be the case.

According to CFTC regulations, derivatives such as futures and options can be provided to US residents only on exchanges called DCM (designated contract market) registered with CFTC (including CME and Cboe). Regarding the provision of derivative transactions via the DeFi system, Berkovitz Commissioner said, “DeFi markets, platforms and websites are not registered as designated contract markets or swap execution facilities. Services using these digital currencies, blockchains and smart contracts. Is not exempt from the commodity trading law, “he emphasized the illegality of unregistered contractors.*“Swap” in “Swap Execution Facility” here does not mean token swap in DeFi.

In addition to legal perspectives, the Berkovitz Commissioner noted that DeFi may not provide consumer protection as guaranteed in existing financial derivatives markets. “The P2P DeFi system has no measures to protect users’ funds and interests,” he said. “There is no mechanism to constantly monitor fraud such as market operations and prevent money laundering.”

There are currently no frameworks or legislation to regulate the DeFi sector in the United States, but related industry groups are working with the government.


Author: Lewis Kikutani
Reference: CFTC

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