CFTC Crackdown on DeFi Platforms for Noncompliance with Trading Regulations

The United States virtual asset regulatory, Commodity Futures Trading Commission (CFTC), crackdown on 3 Decentralized Finance (DeFi) platforms, Opyn, ZeroEx, and Deridex, allegedly failing to comply with the regulations. 

In a recent development to combat money laundering, the US virtual assets regulatory authority CFTC repressed 3 Defi protocols. According to the CFTC, these platforms did not follow the Anti-Money Laundering (AML) regulations and failed to comply with business regulatory requirements. Primary allegations against Deridex and Opyn revolved around failing to register as trading commission merchants. Furthermore, both needed to comply with the business and customer verification rules under the Bank Secrecy Act (BSA).  CFTC stated specified regulations,  including swap execution facility (SEF), futures commission merchants (FCM) and an adequate Know-Your-Customer (KYC) and Know-Your-Business (KYB) to comply with the BSA. 

Decentralized Finance has increased rapidly because of its promise to provide transparency, financial inclusion, and accessibility. The DeFi services eliminate traditional banking regulations and limitations; that’s why they become vulnerable and raise concerns about financial crimes related to money laundering and terrorist financing. The CFTC’s decisions to initiate legal action against Opyn, ZeroEx, and Deridex emphasize the level of inspection that governmental authorities have given the DeFi companies. They also faced hefty fines of $250,000, $200,000, and $100,000, respectively.

This case highlights the importance of complying with the Commodity Exchange Act (CEA) and CFTC regulations for the other DeFi protocols. Although DeFi supporters praise the industry’s decentralized structure, but this freedom also has drawbacks. 

Suggested Reads: 

Spotify Becomes the Hub of Money Laundering for Scammers in Sweden

Citigroup Agrees to Pay $2.9m Fine on Shortcomings in Record-Keeping Regulations