CFTC Action Shows Why Crypto Developers Should Prepare to Leave the US
Decentralized Autonomous Organizations (DAOs) were meant to be regulatory proof. Federal regulators have now targeted not only a DAO, but also its investors.
Opinion
There is considerable concern in the web3 world regarding the regulation and legal status of cryptocurrency projects. This is particularly visible in the United States, where the Commodity Futures Trading Commission (CFTC) stoked concerns in September by announcing that it was imposing a $250,000 fine on a decentralized autonomous organization (DAO), Ooki DAO, and to its investors. The fine was particularly concerning, given that DAOs are supposed to be "regulatory proof".
The CFTC said in its statement on the matter that Ooki DAO's bZeroX protocol offers illegal over-the-counter trading of digital assets. The agency took issue with the fact that the founders, Tom Bean and Kyle Kistner, tried to use the existing bZeroX protocol within the DAO to put it beyond the reach of regulators.
"By transferring control to a DAO, the founders of bZeroX announced to members of the bZeroX community that operations would be enforcement-proof," the CFTC said. “The founders of bZx were wrong, however. DAOs are not immune from law enforcement and cannot violate the law with impunity.”
The fine is not so surprising. The CFTC and other regulators are not going to bow to the veil of decentralization. But, there is something about the decision that is extremely concerning for lawyers and Web3 developers. The agency's complaint stated that voters in a given DAO may be clearly responsible.
In other words, the founders alone will no longer be targeted, as users who participate in them could also be held liable. This will definitely have a chilling effect on turning people away from DAOs and Web3 in general. After all, the whole point is to avoid this kind of targeting and create new ecosystems where all parties can vote in peace on issues that concern them.
Related: Biden's cryptocurrency framework is a step in the right direction
And this is not an isolated case. The Securities and Exchange Commission rivals the CFT...
Decentralized Autonomous Organizations (DAOs) were meant to be regulatory proof. Federal regulators have now targeted not only a DAO, but also its investors.
Opinion
There is considerable concern in the web3 world regarding the regulation and legal status of cryptocurrency projects. This is particularly visible in the United States, where the Commodity Futures Trading Commission (CFTC) stoked concerns in September by announcing that it was imposing a $250,000 fine on a decentralized autonomous organization (DAO), Ooki DAO, and to its investors. The fine was particularly concerning, given that DAOs are supposed to be "regulatory proof".
The CFTC said in its statement on the matter that Ooki DAO's bZeroX protocol offers illegal over-the-counter trading of digital assets. The agency took issue with the fact that the founders, Tom Bean and Kyle Kistner, tried to use the existing bZeroX protocol within the DAO to put it beyond the reach of regulators.
"By transferring control to a DAO, the founders of bZeroX announced to members of the bZeroX community that operations would be enforcement-proof," the CFTC said. “The founders of bZx were wrong, however. DAOs are not immune from law enforcement and cannot violate the law with impunity.”
The fine is not so surprising. The CFTC and other regulators are not going to bow to the veil of decentralization. But, there is something about the decision that is extremely concerning for lawyers and Web3 developers. The agency's complaint stated that voters in a given DAO may be clearly responsible.
In other words, the founders alone will no longer be targeted, as users who participate in them could also be held liable. This will definitely have a chilling effect on turning people away from DAOs and Web3 in general. After all, the whole point is to avoid this kind of targeting and create new ecosystems where all parties can vote in peace on issues that concern them.
Related: Biden's cryptocurrency framework is a step in the right direction
And this is not an isolated case. The Securities and Exchange Commission rivals the CFT...
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