Coinbase CEO opposes CFTC’s actions on DeFi protocols in the United States. His main concern revolves around the possible weakening of the nation’s industry strength.
Furthermore, Armstrong is urging DeFi protocols not to settle and instead pursue these cases in court. He argues that setting a precedent is crucial, as he believes the claims lack sufficient substance.
On September 13, Armstrong shared a statement on X (formerly Twitter), expressing his belief that it is unlikely for the CFTC to take action against DeFi protocols.
These businesses do not fall under the category of financial services; therefore, it is highly improbable for the Commodity Exchange.
Armstrong expresses his hope that these DeFi protocols will bring these cases to court to establish a precedent. He noted the court’s impartiality, affirming its dedication to law and order principles within a steadfast stance towards the industry. The courts have consistently proven their willingness to safeguard justice with diligence.
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
Moreover, Amid the issuance of simultaneous orders and settlements by the CFTC, three notable DeFi firms – Opyn, ZeroEx, and Deridex – have come under scrutiny. Deridex and Opyn faced charges for failing to register as a swap execution facility (SEF) or designated contract market (DCM).
Additionally, the Bank Secrecy Act required them to implement a customer identification program. Accusations have been made against ZeroEx for engaging in illicit leveraged retail commodities trading in digital assets.
Armstrong Warns DeFi As US Regulators Prompt Offshore Moves
Armstrong advises that if enforcement efforts are intensified, there is a potential risk of driving the DeFi industry to relocate offshore.
Most of Armstrong’s followers concurred with him in their comments, although a few harbored reservations regarding the viability of pursuing a battle over a settlement with the US regulator.
According to one user, many projects lack the necessary funds to combat the SEC. They often find themselves resolving the matter through settlement.
A lot of the projects don’t have funds to fight the sec and end up having to settle
— Jarek 🦄 (@JarekPiotrowski) September 13, 2023
Another participant suggested establishing a dedicated fund to provide additional assistance. They proposed, “Why not create a legal defense fund specifically tailored for small projects?”
How about set up a legal defense fund for small projects?
— MG (@hcaulfield8148) September 13, 2023
The legal battles between crypto firms and US regulators have sparked discussions about the significant expenses incurred. Ripple’s CEO, Brad Garlinghouse, recently disclosed their ongoing legal dispute with the SEC. This dispute may have resulted in legal fees surpassing $200 million.
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On July 13, Ripple achieved a partial victory as the ruling declared that their native token, XRP, is not classified as a security for retail sales. However, the SEC has appealed against this verdict, introducing the possibility of increased legal fees for Ripple.