Unregulated decentralized finance exchanges (DeFi) pose an "obvious threat" to markets and customers, according to Ian McGinley, head of the US Commodity Futures Trading Commission (CFTC).
According to him, DeFi protocols typically offer customers trading in derivatives, which in most cases are subject to registration with the regulator.
McGinley has said these types of platforms are a set of smart contracts that operate without complying with KYC rules, proper disclosure of information, separation of corporate and user assets and other regulations.
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In a large number of cases, the financial products offered can only be traded by clients of a certain category on compliant platforms.
McGinley has also referred to the fact that even minor errors in smart contracts on decentralized platforms lead to vulnerabilities with the loss of "tens or hundreds of millions" of customer funds.
He has added:
"The existence of unregulated DeFi exchanges is an obvious threat to the markets regulated and customers protected by the CFTC, and it is one we have taken very seriously."