Brian Armstrong, the CEO of Coinbase, has entered the debate surrounding the recent enforcement actions carried out by the Commodity Futures Trading Commission (CFTC) against operators of decentralized finance (DeFi) protocols. Armstrong is advocating for DeFi protocol operators to take legal action against the CFTC, emphasizing the need to establish legal precedents in the emerging DeFi landscape.
Armstrong’s remarks come in response to the CFTC’s recent enforcement actions, which included settlements with DeFi protocols Opyn, ZeroEx, and Deridex. These protocols were ordered to pay civil monetary penalties ranging from $100,000 to $250,000. The charges primarily centered on regulatory violations related to registration and compliance with the Commodity Exchange Act.
In a statement shared on the social media platform X, Armstrong argued that the CFTC should exercise caution when pursuing enforcement actions against decentralized finance protocols. He contended that these protocols do not fit the traditional mold of financial service businesses, raising doubts about whether the Commodity Exchange Act is applicable to them.
The CFTC should not be creating enforcement actions against decentralized (DeFi) protocols. These are not financial service businesses, and it’s highly unlikely the Commodity Exchange Act even applies to them.
My hope is these DeFi protocols take these cases to court to…
— Brian Armstrong 🛡️ (@brian_armstrong) September 13, 2023
Armstrong expressed concern that aggressive enforcement actions against DeFi protocols could result in driving this innovative and critical industry offshore. He hopes that DeFi protocols, including those involved in recent enforcement actions like Opyn, ZeroEx, and Deridex, will choose to challenge these actions in court. The objective is to establish legal precedents in the rapidly evolving DeFi sector.
Armstrong’s confidence lies in the belief that the courts will uphold the rule of law and provide much-needed clarity in the regulatory landscape. Coinbase itself has faced regulatory challenges, notably from the Securities and Exchange Commission (SEC). In June, the SEC filed charges against Coinbase related to various aspects of its business, including allegations of operating without proper registrations as an exchange, broker, or clearing agency.