- Regulators have met with representatives from leading DeFi companies, the Financial Times reported.
- The crackdown on centralized crypto exchanges has already begun, with Binance facing restrictions in the UK and Japan.
- Decentralized crypto exchanges have avoided such harsh treatment, but regulators are circling.
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The Securities and Exchange Commission and the Commodities Futures Trading Commission met with representatives from leading decentralized finance companies as crypto comes under fire from regulators worldwide, the Financial Times reported over the weekend.
Hosted by a finance trade body, the virtual meeting consisted of presentations from automated crypto exchanges like Uniswap and other players in the fast-growing DeFi sector, according to the FT.
The conference comes as regulators’ eyes are fixed on the potential harms of an unregulated crypto sector. The crackdown on centralized crypto exchanges has already begun, with financial authorities in the UK and Japan taking tough lines on Binance, the largest exchange by volume.
Decentralized crypto exchanges have so far avoided such harsh treatment, but regulators are circling. CFTC commissioner Dan Berkovitz laid into DeFi in a speech this month, arguing that automated exchanges in their current form are a “bad idea” and potentially run afoul of the Commodity Exchange Act.
“The CEA requires any facility that provides for the trading or processing of swaps to be registered [with the CFTC]. DeFi markets, platforms, or websites are not registered,” he said. “The CEA does not contain any exception from registration for digital currencies, blockchains, or ‘smart contracts.'”
DeFi insiders have complained that regulators often do not understand the industry, creating bad fixes for misconceived problems that smother innovation.
“There have been regulatory proposals that misunderstand DeFi – both the role of different actors and of the technology – and that would impose liability and burdens far beyond current law, and on largely uninvolved software developers,” wrote Marvin Ammori, chief legal officer at Uniswap Labs, in a blog post.
“These proposals are akin to trying to hold the inventor of SMTP responsible for every spam email ever sent, or holding the inventor of HTTP responsible for every illegal website.”