Paradigm Urges CFTC to Craft DeFi Perps Regulatory Path

Crypto investment firm Paradigm has called on the U.S. Commodity Futures Trading Commission (CFTC) to develop a comprehensive regulatory framework specifically for decentralized finance (DeFi) perpetual derivatives, arguing current proposals focus too narrowly on centralized platforms.

CFTC Advisory Committee Proposed for DeFi Perpetuals

Paradigm submitted comments responding to a CFTC request for input on perpetual derivatives, contracts without an expiration date that dominate crypto trading. While the CFTC’s inquiry centered on perps listed by registered centralized entities, Paradigm stressed the transformative potential lies with decentralized finance (DeFi)-based perpetuals traded via blockchain protocols.

DeFi perps are non-expiring futures contracts executed automatically through smart contracts on decentralized networks. These onchain perpetuals offer significant advantages, Paradigm stated. They provide transparency, with funding rates and trade data publicly auditable on the blockchain, and composability, meaning they integrate seamlessly with other DeFi tools like lending protocols. Users also retain custody of their assets, minimizing counterparty risk.

By 2025, Paradigm explained that perpetuals accounted for 93% of all crypto derivatives volume globally. Despite their prevalence and benefits, DeFi perpetuals operate in a U.S. regulatory gray area, Paradigm noted. The CFTC’s existing framework, designed for traditional markets, is ill-suited for decentralized systems. Past enforcement actions inconsistently classifying DeFi perps as swaps create uncertainty and stifle innovation.

Paradigm urged the CFTC to convene a new Perpetuals Special Advisory Committee (PSAC) within 90 days. This panel of experts should deliver concrete recommendations for a modern, tech-neutral regulatory approach for DeFi perpetuals. Key areas for the PSAC include exploring a public interest exemption from traditional exchange registration for DeFi protocols, creating a tailored compliance framework recognizing decentralized structures, and establishing clear rules enabling safe retail participation.

The firm emphasized that embracing DeFi perpetuals aligns with a recent executive order promoting digital asset innovation. Paradigm contends that providing regulatory clarity is essential for the U.S. to lead in the evolving derivatives market and harness the potential of decentralized technologies.