CFTC advisory committee advances recommendations urging a timely focus on DeFi

An advisory committee for the Commodity Futures Trading Commission voted on Monday to submit a report to the commission calling on the government and industry to work to understand decentralized finance and "advance its responsible and compliant development." 

The CFTC's Technology Advisory Committee voted during a meeting to make recommendations, which some say is the first substantial report on DeFi by a government advisory committee. 

CFTC Commissioner Christy Goldsmith Romero, who sponsors the committee, said the report is meant to "to help inform ongoing policy debates in the U.S. Congress, state legislatures, and regulators including the CFTC," the commissioner said in a statement. 

The report includes recommendations for policymakers such as increasing knowledge around DeFi, the enhancement of "timeliness and effectiveness of enforcement," as well as assessing existing federal and state regulatory frameworks of DeFi and finding where regulations need to be expanded to address risks. 

"While over the last few years, policymakers around the globe have constructed regulatory frameworks for crypto assets, the focus has almost exclusively been in the context of centralized exchanges with regulators seeking information from siloed intermediaries the same way that information flowed from banks to their regulators today," said Ari Redbord, head of legal and government affairs for TRM Labs. Redbord also is vice chair of the CFTC's Technology Advisory Committee. 

Government officials around the world have honed in on how to regulate DeFi. In December, the International Organization of Securities Commissions, a global standard setter to securities regulators, made nine recommendations in December covering disclosures and cross border cooperation. Lawmakers in the U.S. have been working on bills to regulate other parts of the crypto industry, namely stablecoins, though DeFi hasn't been a major part of the discussions. 

A first

Justin Slaughter, policy director at Paradigm and a CFTC technology advisory committee member, called the report "the first major report on DeFi by a government advisory committee and is arguably the most comprehensive review of DeFi by any U.S government agency thus far."

Slaughter noted that the committee's recommendations don't have the force of law, but said the report was a "major step forward for policymaking on DeFi."

"We have the first effort at surveying the opportunities DeFi promises and the risks that it could present," Slaughter wrpte in a post on X following the meeting. "Policymakers can consider this a first cut at a map as they navigate policymaking for DeFi."