The DeFi sector continued its negative march this week amid lawsuits and negative assessments by regulators.
This week, the news did not smile on the decentralized finance (DeFi) sector, which continues to lose ground in the current bear market. The news for the area has not been encouraging at all, except for some predictions from Changpeng Zhao. Regulators remain the main threat on the horizon for decentralized projects, especially in the United States.
Hackers are also on the list of threats. These two actors are the main deterrents for investors when placing capital in dApps. Hence, the total value locked (TVL) in general continues to decline.
Global Securities Regulator Lashes out at DeFi This Week
The global securities regulator IOSCO considers that the MEV within decentralized finance is an unlawful activity. The maximum extractable value (MEV) is the total that can be extracted by validators within a network. This allows them to sort, include, and exclude transactions to maximize the profits they can make with each block.
Although this is one of the most popular ways to attract capital through incentives, its days could be numbered. If this type of practice is illegal within traditional finance, it is a matter of time before regulators hunt them down in decentralized finance. Consequently, to the same extent that adoption increases, cases of regulatory treatment in this regard will multiply. This week’s IOSCO report becomes bad news for the DeFi sector.
CFTC Charges Against Three Decentralized Protocols
The Commodity Futures Trading Commission (CFTC) attacked several protocols that it accused of operating assets without the proper license. In a press release, the commission announced legal proceedings against ZeroEx, Opyn, and Deridex. This agency attacks firms focused on the trading of digital assets based on the blockchain from its territory.
“At some point, DeFi operators had the idea that illegal transactions become legal when facilitated by smart contracts… This is not the case,” said Ian McGinley, director of enforcement at the CFTC.
There are several charges against these decentralized platforms. Deridex and Opyn were accused of some irregularities with registration. All three protocols will have to answer for the illegal offering of leveraged and margined retail commodity transactions in digital assets.
CZ Hopes for a Bright Future for Decentralized Finance
It can’t all be bad news. There are also possibilities that capital will flow into DeFi protocols. At least, that is the opinion of Binance CEO Changpeng Zhao.
Recently, the businessman praised the sector during his participation in a live on the social network X. He stated that in the next bull run of the crypto market, DeFi would surpass CeFi in terms of trading volume. “I think the more decentralized the industry becomes, the better,” CZ commented.
Despite the little competition they currently represent, the businessman highlighted that decentralized finance is part of the future. The SEC’s onslaught against centralized trading exchanges is leading many investors to take the path of decentralized exchanges.
This vision of CZ is similar in nature to that of his rival Brian Armstrong of Coinbase. The latter proposes the creation of a global decentralized exchange to take over.
With this positive news, the DeFi sector, which appeared worn out this week, could keep its future potential intact. Either way, everything will depend on regulators’ plans to prevent or allow the expansion of privacy- and technology-based finance.
By Audy Castaneda
