CFTC Commissioner Gives Anti-DeFi Speech

The DeFi space is expanding fast, but a U.S CFTC commissioner seems to be pouring cold water on this emergent market. Commissioner Dan Berkovitz shared his negative views on DeFi during his keynote address on climate change and decentralized finance at the Assets and Derivatives Forum 2021.

One of the concerns he shared about the space is that it does not offer public protections from money laundering and other crimes. His rationale was that there was no way to gather information on such crimes in a purely peer-to-peer system.

Still, on the issue of consumer protection, he argued that, unlike a centralized system, there was no way to restitute a customer in case they fell victim to fraud or other crimes. To quote him, in such a system, “it is each person looking out for themselves.”

Besides pointing out this supposed loophole on consumer protection, Berkovitz also questioned the legality of decentralized finance. He stated that under the CEA, DeFi could not be legal.

His rationale was that under the CEA rules, any kind of futures contract must occur in a DCM (Designated Contract Market) under the oversight of the CFTC. Since DeFi does not play by these rules, then it’s operating outside of the law.

Following his analysis of the space , Berkovitz believes that U.S regulators should pay closer attention to this market. He added that regulated entities would be playing at a disadvantage without regulations compared to their DeFi counterparts.


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