A surprise regulatory order last week signals Washington has run out of patience with decentralized finance's skirting of rules around tying customer identity to transactions.
The CFTC presented evidence that the creators of the protocol, bZx, marketed it as a service where traders could transact without posting their identity.Smart contract blockchains don't provide perfect anonymity, but, for a sophisticated user determined to hide, it can take considerable resources to match a blockchain address with a person.The bZx protocol allows anyone to make leveraged bets on the future value of a token in a trustless fashion — meaning without an intermediary.
It was able to do this with smart contracts on a blockchain, secured by the traders' own crypto collateral. By using a smart contract, the trade was operated automatically, and everything about it was transparent to all users.the CFTC monitors markets like that in the U.S., but the complaint alleges that the creators of the bZx protocol attempted to skirt those rules.
They did it, the CFTC contends, by turning the software over to a decentralized autonomous organization , controlled by those who held its associated governance token.There are two kinds of smart contracts on the original smart contract blockchain, Ethereum — those that can be upgraded or changed, and those that can't.
The creators turned control of the bZx protocol over to a DAO in August 2021, but the team that created it controlled a significant amount of