• CFTC Chair Rostin Behnam believes decentralized exchanges (DEXs) and other aspects of the decentralized finance (DeFi) world can be regulated in the US.
• He states that how an exchange is operated is not the main issue, but rather what it offers and who initially set it up.
• US securities law already covers most digital assets, and legal precedent will help guide regulation of DeFi by either the CFTC or SEC.
CFTC Chair on Regulating DEXs
CFTC Chair Rostin Behnam believes that decentralized exchanges (DEXs) and other aspects of the decentralized finance (DeFi) world can be regulated in the US, even though it is “just code.” According to Behnam, it’s not about how an exchange is operated but rather what products are being offered and who initially set up these entities. The CFTC chair also noted that US securities law already covers most digital assets, with legal precedent playing a driving role in analysis for regulation.
What Are U.S. Customers Being Offered?
Behnam stated that regulators must ask what U.S customers are being offered when considering regulating DEXs or DeFi products: “who is either the individual or group of individuals who set up that entity, that code, to offer those products?” Regulatory agencies tasked with regulating DeFi are likely to be either the Commodity Futures Trading Commission (CFTC) or Securities Exchange Commission (SEC).
Bitcoin as a Commodity
SEC Chair Gary Gensler has previously said Bitcoin is a commodity under SEC regulations – however he has not commented further on other digital assets. While Behnam refused to go into detail on individual digital assets during his interview with Bloomberg’s Odd Lots podcast, he did mention crypto should be regulated like other financial assets in general: “For crypto, we have to use the same playbook that we have used in the past as we think about a policy that we construct.”
Bad Actors Will Be Brought To Account
Behnam emphasized bad actors will be brought to account when regulating DeFi: “We’ll continue bringing bad actors to account.” He also mentioned legal precedent “for better or for worse, is the driving force that sits as the foundation of our legal analysis.”
In conclusion, CFTC Chair Rostin Behnam believes DEXs and other aspects of DeFi can be regulated in some capacity within US jurisdictions despite their decentralised nature – with regulatory agencies such as CFTC and SEC likely involved in forming policies around them. However there remains ambiguity over which digital assets fall under which regulations – something regulators such as Gensler have yet to comment on further – while bad actors will still need to be held accountable for any violations reported against them when regulating this space