DeFi enforcement sparks dissenting opinion from CFTC commissioner

Commodity Futures Trading Commission (CFTC) Commissioner Summer K. Mersinger has said she is concerned that the United States CFTC is considering enforcement actions related to decentralized finance (DeFi) protocols instead to interact with the public.

In a public statement issued on September 7, the dissident commissioner voiced their doubts about the approach taken by the CFTC in these cases, arguing that enforcement actions are not the most appropriate means of addressing new DeFi technology. The commissioner believes the CFTC should engage with the public and stakeholders through rulemaking and other regulatory tools rather than relying primarily on enforcement actions.

Mersinger said:

"I am concerned that in these cases the Commission is taking another step down the path of bringing enforcement action when we should be engaging with the public."

Mersinger expressed his willingness to apply CEA and CFTC rules to innovative situations, especially when necessary to protect market participants from fraud and abuse, consistent with Congressional mandate. However, he noted that the Commission's orders in these cases did not indicate any misappropriation of client funds or victimization of market participants by DeFi protocols subject to enforcement actions.

The commissioner raised questions about regulatory jurisdiction over DeFi protocols, the need for clear rules, and the potential consequences of their application in the absence of transparent regulation. Despite the challenges, the CFTC's spring 2023 regulatory agenda does not include any DeFi-related regulatory activity, leaving these issues largely unaddressed.

Related: CFTC Commissioner Calls for Crypto Regulation Pilot Program

The United States Commodity Futures Trading Commission announced that it is taking regulatory measures against three decentralized financial protocols for allegedly failing to register several derivatives trading offers. The exchanges are namely Opyn Inc., ZeroEx Inc. and Deridex Inc.

Deridex and Opyn faced charges of failing to register as a swap execution venue or designated contract market, as well as failing to register as a futures commission dealer. Additionally, the CFTC accused the two protocols of failing to comply with the customer provisions outlined in the Bank Secrecy Act.

Magazine: Crypto Regulation: Does SEC Chairman Gary Gensler Have the Final Say?