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 Commodity Futures Trading Commission (CFTC) chair Rostin Behnam.
“It’s easy to suggest, ‘oh there’s no institution, there’s no individual, it’s just code, you can’t regulate that, it’s self-effectuating,’ but that really is the wrong set of questions,” Behnam said on Bloomberg’s Odd Lots podcast this week.
He pointed out that how an exchange is operated is not the main issue, but rather what it offers and who initially set it up, saying:
“It’s really about what are U.S. customers being offered and exposed to. And who is either the individual or group of individuals who set up that entity, that code, to offer those products?”
Behnam further explained that US securities law already covers most digital assets, and said legal precedent “for better or for worse, is the driving force that sits as the foundation of our legal analysis.”
“We’ll continue bringing bad actors to account,” Behnan said, while noting that the agencies that will be tasked with regulating DeFi will be either the CFTC or the Securities and Exchange Commission (SEC).
In the US, the SEC generally regulates the issuance and trading of securities, while the CFTC regulates commodities and derivatives trading. Due to this division of responsibilities, a key issue among regulators has been how various digital assets should be categorized.
In the past, SEC chair Gary Gensler has stated explicitly that Bitcoin is a commodity, but he has refused to go into detail on other digital assets.
In the podcast interview, Behnam also refrained from going into detail on individual digital assets, but said that crypto in general should be regulated like other financial assets.
“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,” the CFTC chair said.
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