Commodity Futures Trading Commission (CFTC) Commissioner Dan M. Berkovitz today told unregistered decentralized financial markets (DeFi) are considered illegal for violating the Commodity Exchange Act (CEA).
"Not only is the unregistered DeFi market considered illegal, but I also don't see how it can be legal under the CEA," he added.
For information, the CEA is an act that requires futures contracts to be traded in the designated contract market (DCM) legally and regulated by the CFTC.
However, Berkovitz stressed that to date no DeFi platform has been successfully registered as a DCM or swap execution facilities (SEF).
In the wake of the growing crypto sector, Berkovitz believes supervisors need to be aware of it as a whole including DeFi and other applications.
More worryingly, the DeFi market may not have the same protections as centralized financial services such as banks and other financial firms given more reliance on peer-to-peer (P2P) systems.
P2P systems do not involve intermediaries. In contrast to the conventional financial system which is seen as safer and more reliable due to the existence of third parties to monitor investors ’investments in the US market.
