{"id":3110,"date":"2021-01-26T20:26:37","date_gmt":"2021-01-26T20:26:37","guid":{"rendered":"https:\/\/timestampmag.com\/?p=3110"},"modified":"2021-01-26T20:26:37","modified_gmt":"2021-01-26T20:26:37","slug":"defis-place-in-existing-regulations","status":"publish","type":"post","link":"https:\/\/timestampmag.com\/2021\/01\/26\/defis-place-in-existing-regulations\/","title":{"rendered":"DeFi’s Place in Existing Regulations"},"content":{"rendered":"\r\n\r\n\r\n\r\n\r\n
A corner of the crypto<\/a>\u00a0universe that makes up less than 1% of the total market capitalization of crypto assets<\/a>\u00a0has been making headlines since June. The\u00a0quest for decentralized financial products has chiefly contributed to the astronomical growth witnessed across the DeFi sector. At present, more than $24 billion<\/a>\u00a0worth of crypto assets are locked across the protocols.<\/p>\r\n <\/p>\r\n\r\n\r\n\r\n Image Source: <\/strong><\/em>John Hargrave<\/a><\/em><\/p>\r\n\r\n\r\n\r\n\r\n\r\n As of June 1, the total value locked (TVL) across DeFi protocol was a mere $1billion, this represents a 24-fold increase. The growing popularity of the DeFi protocols and the DeFi tokens is now attracting the eyes of regulators. Although there have been many arguments opposing the possibility of regulating an entirely decentralized product like DeFi.<\/p>\r\n\r\n\r\n\r\n From the legal perspective, there is a lack of clarity about which agency should be regulating the product. And there is also a lack of guidance from multiple agencies that could be responsible for DeFi projects generally.<\/p>\r\n\r\n\r\n\r\n On a daily basis, there are a handful of DeFi projects springing up out of the blues. These projects are reluctant to use terminology that might infer \u201cissuance\u201d, \u201cissue,\u201d or \u201cissuer,\u201d as these words are perceived to be hypersensitive in the securities world.<\/p>\r\n\r\n\r\n\r\n Last year, The Commodity Futures Trading Commission (CFTC) filed a civil enforcement action<\/a>\u00a0in the U.S. District Court, levied a charge against BitMEX and the three individuals who run the trading platform. The suit anchored on the operation of an unregistered trading platform and violating multiple CFTC regulations, including failing to implement required AML procedures.<\/p>\r\n\r\n\r\n\r\n <\/p>\r\n\r\n\r\n\r\n Image Source<\/strong><\/em>: <\/em>Coinformania<\/a><\/em><\/p>\r\n\r\n\r\n\r\n\r\n\r\n This move spurred a lot of debate in the industry, with the assertion that after the BitMEX lawsuit, DeFi protocols could be the next target. Most of these protocols like Uniswap, an AMM DEX<\/a>\u00a0have served as an easy route for criminals to launder stolen funds since anyone can interact with the protocol without completing KYC.<\/p>\r\n\r\n\r\n\r\n Citing the KuCoin Hack<\/a>\u00a0which saw the stolen funds being laundered on Uniswap, this might have spurred the eyes of regulators to get fixed on the sector.<\/p>\r\n\r\n\r\n\r\n The scams that have infiltrated the sector could also spur regulators into action in a bid to protect investors who most of the time are at the mercy of fraudulent projects who dish out unrealistic promises in a bid to lure investments<\/a>\u00a0from both retail and institutional investors. The case of SushiSwap<\/a>\u00a0which saw the foundation funds drained overnight is a close study.<\/p>\r\n\r\n\r\n\r\n Just as expected, The Commodity Futures Trading Commission (CFTC) is now trying to figure out<\/a>\u00a0the best way to classify DeFi protocols and their activities. In a recent unfolding, the CFTC\u2019s Technology Advisory Committee anchored a presentation called \u201cThe Growth and Regulatory Challenges of Decentralized Finance\u201d as written by law professor Aaron Wright and attorney Gary DeWaal.<\/p>\r\n\r\n\r\n\r\n <\/p>\r\n\r\n\r\n\r\n Image Source:<\/strong><\/em>LeapRate<\/a><\/em><\/p>\r\n\r\n\r\n\r\n\r\n\r\nIssues That Could Be Spurring DeFi Regulations<\/strong><\/h2>\r\n
The CFTC\u2019s Tech Team is Now Bent On Looking Into DeFi Activities<\/strong><\/h2>\r\n