Last month, Avraham Eisenberg, the trader who hacked Mango Markets, was accused of market manipulation. On January 9, the Commodity Futures Trading Commission (CFTC) filed a complaint against him. Similarly, the Securities and Exchange Commission (SEC) filed a complaint against Eisenberg on January 20. The rating agency Moody’s published a note on the subject on January 31. In it, Cristiano Ventricelli explains why the repressive action of the two regulators is to be welcomed. Here are the words of the assistant vice president of decentralized finance (DeFi) at Moody’s Investor Service.
The Positive Impact of Repressive Action Against Eisenberg
Through its recent report, Moody’s backed the SEC and the CFTC for filing charges against Eisenberg. The rating agency indicated that the action of the two regulators will be beneficial for DeFi. She believes that sanctioning Eisenberg will rid the DeFi ecosystem of what prevents it from scaling. This will therefore have a positive impact on the DeFi environment which will become “safer and more welcoming“.
The CFTC said in its complaint:Eisenberg engaged in a manipulative and deceptive scheme to artificially inflate the price of swaps offered by Mango Markets“. As for the SEC, it had argued that the hacker’s actions created a deficit on the platform. The latter stood out as soon as the share price returned to its value before the manipulation.
That said, Cristiano Ventricelli has explained : “The fact that both the SEC and the CFTC have taken action against market manipulation by an alleged crooked trader is a positive credit to the industry as a whole.“. He pointed out that the actions of regulators could “improve oversight of the DeFi industry“.
The senior executive at Moody’s believes thatsafer DeFi would attract more institutional investors and individual investors. Thus, decentralized finance may benefit from wider adoption among banks and consumers, for example. Note that DeFi has so far been difficult to regulate, as jurisdiction over open-source protocols is unclear.
According to the Moody’s report, DeFi is not “no longer a no man’s land“. This is a reference to a speech that Christine Lagarde, the President of the ECB, gave in June. Lagarde had campaigned for an extension of the MiCA regulation, the European legislation on cryptos. Indeed, she believes that this legislation should include a framework for the regulation of DeFi.
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