Universal Navigation Inc., known as Uniswap Labs, has been ordered to cease and desist from infringing upon the Commodity Exchange Act (CEA) as part of the settlement. The decentralized-finance code, primarily developed by Uniswap, allows users to trade digital assets, including leveraged tokens, directly without intermediaries.
CFTC Fines Uniswap Labs for Non-Compliant Leveraged Crypto Trades
The CFTC alleged that the trades in question involved leveraged or margined commodities, which can only be offered to non-eligible contract participants on a designated or registered board of trade by the CFTC, a status Uniswap Labs lacked. The CFTC acknowledged Uniswap’s cooperation with the investigation, resulting in a reduced penalty.
“Ian McGinley, the CFTC’s enforcement director, stated, ‘Today’s action reinforces that the Division of Enforcement will rigorously enforce the CEA amidst the evolution of digital asset platforms and DeFi ecosystems.’ He emphasized that DeFi operators need to ensure compliance with the law.”
Uniswap’s Chief Legal Officer, Katherine Minarik, stated through a release that the CFTC inquiry pertained to “a minuscule percentage of trading on our interface involving a limited number of tokens,” and asserted that the resolution did not include any admission or denial regarding the regulator’s conclusions. “We are wholly committed to advancing the future of DeFi for all and engaging in the necessary battles to realize that goal,” she noted.
CFTC Commissioners Summer Mersinger and Caroline Pham provided dissenting comments. Mersinger remarked that the settlement displayed “the characteristics of what is typically understood as regulation through enforcement.” She highlighted that Uniswap had preemptively blocked trading for the affected tokens.
Uniswap Faces SEC Action After CFTC Settlement Controversy
“Instead of recognising Uniswap for its responsiveness to our enforcement efforts and actions taken to adhere to our regulations in the DeFi space, we pursued charges against Uniswap from before those specific tokens were removed from its platform,” Mersinger stated. “Among those in the DeFi sector seeking to comply with the CEA and CFTC regulations, the only take-away from this settlement appears to be the estimated cost the Commission assigns to an endeavor by DeFi to act responsibly.”
Earlier this year, Uniswap revealed it had received a Wells notice from the Securities and Exchange Commission, signaling that the regulator intended to initiate action against the company.
In her dissent, Pham commented “the CFTC’s new approach today is legally simplistic and conveniently circumvents necessary processes to set the stage for enforcement.”
“I believe the CFTC should rigorously combat fraud and manipulation in our markets and hold wrongdoers accountable,” she expressed. “However, that is not the focus of this case. It is disappointing that today’s Commission action represents a hurried and misguided attempt to preempt the SEC and assert control over DeFi.”
Crypto Firms Urge Congress for Clear Guidelines
Both the SEC and CFTC have taken actions in recent times against not only centralized exchanges like Binance but also decentralized crypto initiatives that operate using automated software instead of intermediaries. Some targets have settled, while other cases continue through legal processes.
The crypto sector contends that Congress should establish clearer regulations for digital assets to avoid stifling the industry in the U.S. Detractors argue that the industry must adhere to existing laws. For the latest updates on this story and other cryptocurrency market news, keep following DeyThere.
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