Decentralized finance (defi) protocols are encouraged by the CEO of the bitcoin exchange Coinbase to take regulators to court if they are subject to regulatory crackdowns. The Commodity Futures Trading Commission (CFTC), he insisted, “should not be creating enforcement actions against decentralized (defi) protocols,” highlighting the fact that they are not financial service providers. Armstrong warned that this was just serving to move a significant industry offshore.

Brian Armstrong Wants Defi Protocols to Fight Regulators in Court

After the Commodity Futures Trading Commission (CFTC) cracked down on several decentralized finance platforms, Coinbase CEO Brian Armstrong (Nasdaq: COIN) urged decentralized finance (defi) protocols to sue American regulators in court.

On Wednesday, the executive stated on the social media site X: “The CFTC shouldn’t be initiating enforcement actions against decentralized (defi) systems. Since they do not provide financial services, it is quite doubtful that the Commodity Exchange Act even applies to them. Added him:

In order to set precedence, I hope that these defi procedures take these instances to court. The willingness of the courts to uphold the rule of law has been demonstrated. The sole result of this is the relocation of a significant industry overseas.

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On social media, some users supported Armstrong, while others questioned how a decentralized protocol could sue someone. Many defi platforms, some people said, aren’t actually decentralized.

COINBASE Price Chart – Source: Tradingview

In response to X, attorney Jason Gottlieb said: “I concur with Brian Armstrong that defi procedures should sue the CFTC (and SEC) for making excessive settlement demands. The sad truth is that smaller businesses, for whom settlement over litigation makes a lot more economic sense, are the ones that the agencies target first.

Ouriel Ohayon, the CEO of Zengo Wallet, expressed the following opinion: “Brian, I agree if defi was truly defi, but when the code has admin keys controlled by one or a few, back doors, the ability to reboot or stop the protocol, and more, it’s more defi, whether this is the protocol or the interface of the protocol.” Similar worries were voiced by Defi analyst Chris Blec, who said: “These ‘Defi’ coders have backdoors to drain all cash and make any changes to the code that they want. How decentralized is that? According to him, “This includes Coinbase’s own ‘defi’ project, Base.”

“My hope is that defi protocols will be so decentralized that the notion of them “going to court” is absurd,” Casa CTO Jameson Lopp wrote on X.

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