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A top US regulator said he Googled DeFi and thinks much of it is illegal

Published by Business Insider on Wed, 09 Jun 2021

<p><img src="https://static5.businessinsider.com/image/60c0b0ccfde7960018aace31-2400/GettyImages-52858480.jpg" border="0" alt="GettyImages 52858480" data-mce-source="Joe Raedle/Getty Images" data-mce-caption="Dan Berkovitz (right) has headed the CFTC since 2018."></p><p></p><bi-shortcode id="summary-shortcode" data-type="summary-shortcode" class="mceNonEditable" contenteditable="false">Summary List Placement</bi-shortcode><p>A Commodity Futures Trading Commission official has said he thinks much of the decentralized finance, or DeFi, world is probably illegalafter searching for the term on Google and Wikipedia.</p><p>Commissioner Dan Berkovitz <a href="https://www.cftc.gov/PressRoom/SpeechesTestimony/opaberkovitz7#_ftn15">ranked</a> DeFi among the key challenges facing the CFTC, which regulates US markets in derivatives such as futures, swaps and options, in a speech to an asset management derivatives forum on Tuesday.</p><p>The commissioner described his research, saying he had typed "DeFi" into Google and found a Coindesk article on the issue. He also gave the Wikipedia definition of DeFi.</p><p><a href="https://www.businessinsider.com/defi-decentralized-finance-disruptive-bitcoin-benefits-challenges-bofa-crypto-finance-2021-3">DeFi</a> aims to use blockchain technology to cut intermediaries such as banks and clearing houses out of financial activities such as trading.</p><p>But Berkovitz said he had decided that "unlicensed DeFi markets for derivative instruments are a bad idea." He said intermediaries are important because they can be held accountable when things go wrong.</p><p>Berkovitz, who has been a CFTC commissioner since 2018, added that he does not see how unlicensed DeFi markets are legal under the Commodity Exchange Act, a key piece of financial regulation.</p><p>His speech was one of the first public signs that US regulators are taking decentralized finance seriously. Many banks have <a href="https://markets.businessinsider.com/currencies/news/banks-defi-adapt-decentralized-finance-ethereum-eib-digital-bond-societe-generale-2021-5-1030425551">started investing in the space</a>, which has grown rapidly in 2021 and has the potential to disrupt some of their business.</p><p>Berkovitz said: "In my view, it is untenable to allow an unregulated, unlicensed derivatives market to compete, side-by-side, with a fully regulated and licensed derivatives market." He said competition between unregulated entities could result in regulated companies taking more risks.</p><p>"The CFTC, together with other regulators, need to focus more attention to this growing area of concern and address regulatory violations appropriately," he said.</p><p><a href="https://markets.businessinsider.com/currencies/news/defi-decentralized-finance-regulation-cftc-illegal-dan-berkovitz-blockchain-2021-6-1030507969#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="https://www.businessinsider.com/red-wine-good-heart-health-benefits-healthy-cardiologist-2019-4">How heart disease created America's wine industry</a></p>
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