Leveraged tokens are ERC-20 tokens that track the price movements of cryptocurrencies and offer multiple returns (or losses) on those movements.
Due to the recently resolved US Commodity Futures Trading Commission (CFTC) action, trading leveraged tokens is no longer available on Matcha for US users.
The inherent decentralization of 0x and Matcha naturally makes implementing such orders a technical challenge, but we were able to formulate a compliance process and enter a workable settlement that included this restriction.
Statement on the CFTC settlement
Soon after the settlement, we released the following public statement on X (Twitter):
“0x, the developer of DEX aggregator Matcha, recently cooperated with the CFTC to resolve an inquiry regarding tokens constituting less than 0.1% of Matcha’s trading volume since inception. As part of our efforts to drive sustained web3 adoption, our team appreciates the CFTC’s bringing these tokens to our attention.
At 0x, strategic decisions are made with input from outside legal counsel. In this case, we are implementing additional processes after constructive dialogue with the regulatory agency. These processes are designed to better protect Matcha users and comply with regulatory requirements.
As always, we will continue to welcome input from regulators about optimal compliance measures for our business and our users. With greater clarity, we move toward the goal of furthering web3 adoption, and we will never stop building.”
There was one dissenting statement issued against the actions, from CFTC commissioner Summer Mersinger.
Will Matcha continue to serve US customers?
Yes, we aren’t going anywhere! The priority for us is ensuring that DeFi continues to thrive both at home in the US and internationally. Greater availability comes with its challenges, as regulators are hard pressed to keep up with the pace of innovation, but as you’ll hear in the interview below, “We're going to ensure Matcha is available to US people, in a compliant way. … We're not going anywhere. We're staying in the US, we're committed to serving US people through Matcha.”
What does this mean for DeFi?
DeFi and cryptocurrency as a whole is facing increased scrutiny and involvement from regulators, which is natural and expected as our industry grows. Although most attention has been given to the actions of the Securities and Exchange Commission (SEC), the CFTC also has jurisdiction over a subset of tokens and it has determined leveraged tokens are within this group.
Get up to speed on the whole case from start to finish in this appearance on the Unchained Podcast, where Matcha co-CEO Will Warren joined for The Chopping Block to address the complex reality of compliance in DeFi.