CFTC action shows why crypto developers should get ready to leave the US

CFTC action shows why crypto developers should get ready to leave the US

There is a lot of anxiety in the Web3 world about regulation and legal status of cryptocurrency projects. This is especially evident in the United States where the Commodity Futures Trading Commission, (CFTC), raised concerns in September by announcing that it would impose a $250,000 penalty on Ooki DAO (decentralized autonomous organization), and its investors. This was especially concerning considering that DAOs are supposed to be “regulation-proof.”

In its statement, the CFTC stated that Ooki DAO’s bZeroX protocol allowed illegal off-exchange trading in digital assets. Agency criticized the fact that Kyle Kistner and Tom Bean, the founders of Ooki DAO, attempted to use existing bZeroX protocols within the DAO in order to make it out of reach for regulators.

The CFTC stated that bZeroX founders hoped to make operations “enforcement-proof” by transferring control to a designated agent. The CFTC stated that the Founders of bZx were incorrect. DAOs may not be exempt from law enforcement, and they are not allowed to violate it with impunity.”

It is not surprising that the fine was imposed. The CFTC and other regulators will not abide by a veil regarding decentralization. Web3 developers and lawyers should be concerned about a particular aspect of the ruling. According to the complaint, voters in a particular DAO could be held liable.

This means that founders will no longer be the only ones targeted. Users who participate could also be held responsible. This will have a chilling impact on people’s attitudes towards Web3 and DAOs in general. The whole purpose of the Web3 project is to prevent this type of targeting and create new ecosystems that allow all parties to vote peacefully on matters that are important to them.

Related: Biden’s crypto framework is a step forward

It’s not an isolated case. The Securities and Exchange Commission and the CFTC are battling for control over the Web3. Crypto libertarians argue that centralized authorities shouldn’t have any say in an ecosystem they have never helped but only attacked.

A bill in the U.S. Senate called the Stabenow/Boozman bill. It would give the CFTC the ability to oversee tokens that are digital commodities. This would allow exchanges and online Web3 service providers to register with the CFTC. It would further enmeshed decentralized finance (DeFi), within a centralized internet that was designed to escape.

Monitoring wallets and targeting smart contracts, among other things

The SEC has always sought to regulate cryptocurrency. It plays an important role in that it can pursue cases of fraud and Ponzi schemes which are common on the Web3. There is a big difference between investigating fraud cases and regulating the industry or governing it with inapplicable regulations.

Crypto regulation is a complex topic. Microtransactions, as well as airdrops, are just one example. These transactions can be made on multiple exchanges, over many years, and with different price fluctuations. It is difficult to report on this from a tax perspective since many platforms have stopped operating. It is almost impossible to account the rewards for staking or derivative tokens liquid stake.

Biden’s administration even targets Proof-of-Work blockchains, with new “comprehensive guidance” issued in September. This is all while many officials in the administration seem to be pushing for digital USD.

A more extreme and draconian regulation in crypto that lawmakers have proposed is for receivers to verify senders’ personal information when transactions exceed $10,000. They also want to regulate smart contracts in the future. Criminal charges are being brought against those who create privacy coins or mixers.

Although nobody has said it, we are witnessing a war against crypto disguised in democratic language. If these measures are not enforced, the very foundations on which distributed ledgers were built will crumble.

Are you ready for more conflict?

It seems that the conflict between modern finance and traditional regulators is reaching an impasse. Modern DeFi requires that regulations adapt to their needs. There is a standoff now between existing legislation and new Web3 protocols. Because the existing legal system is not flexible enough for DeFi, it is nearly impossible to handle.

Ooki DAO is a bad sign for U.S. crypto developers. It won’t be their last. There are many bills and procedures. These actions may encourage developers to create programs that are more difficult to comply with existing laws. They may not be able to comply with existing legislation and have few other options.

Related: Biden’s anemic cryptocurrency framework was nothing new

It leaves U.S. crypto developers in the dark about what to develop. Perhaps the way forward is clear from another angle. All protocols that are being developed may need to be completely decentralized.

This was the foundation of Bitcoin (BTC), the first cryptocurrency. There is no one to target if there isn’t a central point for failure. Developers will need to create an ecosystem that is completely independent from the legacy financial system.

If developers wish to operate on American shores, blockchains that are free from identity and Know Your Customer (KYC), requirements are the only option. They will have to realize this sooner than they think.

Story VC is an entity that invests into blockchain startups and Masha Prussois its founder. In 2018, she co-founded Crypto PR Lab and was the head PR and head events at Polygon from 2021-22. She holds degrees from Berkeley Law School and Sorbonne in France. At the age of 16, she represented Russia at the Winter Olympic Games 2006. She was the youngest snowboarder halfpipe athlete.

This article is intended for informational purposes only and should not be construed as investment or legal advice. These views, thoughts and opinions are solely the author’s and do not necessarily reflect the views or opinions of Cointelegraph.

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Amy Jimenez– Services My name is Amy Jimenez, and I am the main writer behind the" allthetopnews.com" for the ground-breaking and most fragile bits of knowledge into the most recent news in the services sector. I began my voyage of work as an autonomous investment advisor. I had around 4 years of involvement in this field. I am a free soul so; my energy for investigating the world has taken me to the countries over the globe and allowed me to report for a part of the best news affiliations. At present, I am a full-time manager as experienced in the account and began to utilize my capacities.

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