Legal Complexities of Smart Contracts

CFTC Commissioners Dan Berkovitz and Brian Quintenz discuss the difficulties of regulating crypto derivatives and DeFi. Show highlights:

• their backgrounds
• what the CFTC’s duties are regarding crypto
• how the CFTC’s jurisdiction has evolved over the years
• why Commissioner Quintenz believes SEC Commissioner Hester Peirce’s safe harbor proposal is “brilliant”
• what relationship the CFTC and SEC have when making decisions on crypto assets
• why the commissioners believe CFTC’s complaints regarding BitMEX are “well-founded”
• why formal regulation for crypto derivatives is unlikely to be produced by the CFTC
• why leveraged derivatives products are a “concern” to the CFTC
• what makes regulating DeFi platforms so difficult
• when it comes to DeFi, who is a natural entity for the CFTC to regulate, if any
• whether the CFTC would ever go after DeFi "market participants," who the CFTC also regulates
• why smart contracts involving futures could be illegal 
• how the possibility that smart contracts could be illegal squares with the view that software development is a form of free speech 
• whether the CFTC could prosecute developers who write smart contracts
• whether the CFTC needs to re-write its laws in light of DeFi innovation
• why Commissioner Berkovitz thinks the DeFi “winners” will be protocols that focus on meeting regulatory requirements
• why the CFTC approved Bitcoin futures in 2017 while the SEC has not yet approved a Bitcoin ETF
• how a Bitcoin ETF could solve Bitcoin’s accounting issue, which currently gives companies no upside for adding BTC to its balance sheet

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Episode Links

People

Dan Berkovitz, CFTC Commissioner (Sep 2018+)

• CFTC website: https://www.cftc.gov/About/Commissioners/CommissionerDanMBerkovitz/index.htm
• Twitter: https://twitter.com/CFTCberkovitz 

Brian Quintenz, CFTC Commissioner (Aug 2017+)

• CFTC website: https://www.cftc.gov/About/Commissioners/BrianQuintenz/index.htm
• Twitter: https://twitter.com/CFTCquintenz 

Related Links

• CFTC digital asset resources: https://www.cftc.gov/digitalassets/index.htm
• Commissioner Berkovitz DeFi speech: https://www.theblockcrypto.com/linked/107769/cftc-commissioner-criticizes-defi-decries-lack-of-intermediaries
• Commissioner Quintenz smart contracts/blockchain speech: https://www.cftc.gov/PressRoom/SpeechesTestimony/opaquintenz16
• CFTC jurisdiction over digital assets: https://www.cftc.gov/PressRoom/SpeechesTestimony/giancarlostatement010418 
• CFTC BitMEX complaint: https://www.cftc.gov/PressRoom/PressReleases/8270-20
• FTX and Binance remove high leverage: https://decrypt.co/76858/ftx-and-binance-remove-high-leverage-from-exchanges
• SEC Commissioner Hester Peirce’s safe harbor proposal: https://www.sec.gov/news/public-statement/peirce-statement-token-safe-harbor-proposal-2.0 

Bitcoin futures approval from CFTC in 2017: https://www.businessinsider.com/bitcoin-price-futures-trading-exchanges-cftc-2017-12

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