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Coinbase CEO Urges DeFi Firms to Take CFTC in Court Over Its Recent Enforcement Actions

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Coinbase CEO Brian Armstrong has weighed in on the recent enforcement actions brought against DeFi protocols by the CFTC. In a September 13 tweet, the CEO expressed his displeasure, stressing that the US Commodities and Futures Trading Commission should desist from fighting DeFi firms.

He suggested that DeFi protocols take the commodities regulator to court to set a legal precedent. In addition, Armstrong said the hawkish regulatory approach is pushing an important industry away from the US to offshore jurisdictions.

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Brian Armstrong and Republican Legislator Slams CFTC for its Legal Battle Against DeFi Protocols

Brian Armstrong’s remarks come amid a slew of enforcement actions against three decentralized Finance (DeFi) protocols by the CFTC. On September 7, the watchdog filed charges against California-based firms Opyn and ZeroEx, including North Carolina-based company Deridex.

The regulator alleged that the firms operate unregistered swap execution facilities (SEF) and designated contract markets (DCM). It also accused them of illegally offering margined and leveraged retail commodities.

The CFTC demands that the mentioned firms pay fines (Opny to pay $250,000, ZeroEx $200,000, and Deridex $100,000) and stop violating the Commodity Exchange Act.

While the matter remains unresolved, Coinbase’s CEO slammed the regulator for making such moves. Armstrong, alongside some legislators, supported the affected protocols. The CEO encouraged them to seek justice from the court.

In a September 7 statement, Summer Mersinger, the Republican Commissioner, expressed her misgiving over the CFTC’s action. She highlighted the urgency of the CFTC to focus on setting up clear regulatory guidelines for DeFi rather than utilizing enforcement actions.

Moreover, Coinbase CEO Brian Armstrong said that DeFi protocols are not financial businesses, and the Commodity Exchange Act (CEA) shouldn’t apply to them.

US Regulator Heighten Scrutiny on Crypto Firms

This isn’t the CFTC’s first enforcement action against cryptocurrency firms. It bears mentioning that the US Commodities regulator won in one case against a crypto-related business.

On June 9, a US district judge ruled in favour of the regulator in a case against Ooki DAO for violating the CEA in September 2022. The court ordered the DeFi protocol to permanently shut down operations and pay a civil penalty of $643,542.

Since the start of 2023, the crypto industry has witnessed increased regulatory scrutiny as US regulators embark on strict enforcement actions on digital assets service providers. The US Securities and Exchanges Commission also sued two major crypto firms, Binance and Coinbase, accusing them of violating US securities laws.

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