Dan Berkovitz's role means he will play a crucial role when it comes to bringing enforcement cases.
"Not only do I think that unlicensed DeFi markets for derivative instruments are a bad idea, I also do not see how they are legal under the [Commodity Exchange Act]."
"I'm excited to work again with Chair Gensler on a regulatory agenda that will enhance investor protection, strengthen our capital markets, and facilitate capital formation."
The Case Against Disruption
Speaking at the FIA and SIFMA AMG Asset Management Derivatives Forum on June 8, Berkovitz said:
"A threshold question is whether the public will benefit from disrupting the current financial system that relies extensively on financial intermediaries."
Noting that DeFi supporters argue that cutting out intermediaries like banks, exchanges, futures commission merchants, payment clearing facilities and asset managers, "offers consumers more control over their investments," Berkovitz suggested that they provide too many "critical financial services" to investors to lose. He added:
"Regulated and licensed intermediaries must meet established standards of conduct and can be held legally responsible for failing to meet those standards of conduct. Intermediaries can be held accountable when things go wrong."
Along with calling it unfair to asked regulated and licensed derivatives markets to compete with unregulated and unlicensed competitors, Berkovitz warned:
"In a pure 'peer-to-peer' DeFi system, none of these benefits or protections exist. There is no intermediary to monitor markets for fraud and manipulation, prevent money laundering, safeguard deposited funds, ensure counterparty performance, or make customers whole when processes fail."
A system without intermediaries, he warned, is one governed by the principle of caveat emptor — "let the buyer beware."
Berkovitz concluded his remarks with a call to action:
"For all these reasons, we should not permit DeFi to become an unregulated shadow financial market in direct competition with regulated markets... regulators need to focus more attention to this growing area of concern and address regulatory violations appropriately."