CFTC Chair: Anonymity Won’t Protect DeFi from Regulators

• CFTC Chairman Rostin Behnam clarifies the agency’s view on DeFi.
• DeFi must comply with all financial regulations, despite being “just code.” 
• Behnam suggested that the agency will probe into who is behind DeFi apps. 

As centralized exchanges bore the brunt of the latest US regulatory crackdown, DeFi remained undisturbed. However, according to the latest remarks by the Commodity Futures Trading Commission (CFTC) Chairman, that may soon change. The anonymity and self-executing nature of DeFi won’t shield developers from regulators, he said. 

On Thursday, May 18, CFTC Chair Rostin Behnam explained the agency’s stance on DeFi regulation. In an interview with Bloomberg, Behnam underlined that DeFi would have to comply with financial regulations.

CFTC Chair: It’s About Who Set Up DeFi Apps

Proponents have long argued that traditional regulation doesn’t work in the case of DeFi. Its autonomous operations run on smart contracts without any need for intermediaries. This is why supporters question whether regulators can tackle the sector. 

Despite these concerns, CFTC Chair Rostin Behnam has clarified that DeFi applications must follow all financial rules on the books. 

“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,” Behnam explained. However, he suggested that these are not really the right questions to ask. 

Behnam explained that the real question is what these protocols do and who ultimately runs them. 

“It’s really about what are U.S. customers being offered and exposed to,” he underlined. “And who is either the individual or group of individuals who set up that entity, that code, to offer those products?” he said. 

The developers and investors behind DeFi applications are often anonymous individuals. The developers and investors often retain the controlling stake in a DeFi application. This enables them to change the rules at will. 

On the Flipside

• The CFTC’s stance raises questions about how it will enforce regulations on autonomous, non-compliant DeFi platforms.
• US government agencies don’t agree on which agency has jurisdiction over crypto assets. Notably, the Securities and Exchange Commission’s (SEC) jurisdiction overlaps with CFTCs. Specifically, SEC Chair Gary Gensler claims all crypto assets except Bitcoin are securities. 

Why This Matters

As the DeFi space expands, understanding the regulatory landscape becomes increasingly crucial for platforms and users alike. 

Read more about CFTC going after Binance:

Binance Lawsuit Explained: Why CFTC Involvement Is a Big Deal

Read more about Uniswap Lab’s take on key Ethereum proposal: 

Uniswap Explains How Account Abstraction Can Make Crypto Mainstream