dYdX Operation Trust intends to relocate operations to the Cayman Islands. This action comes as US regulators step up their scrutiny of Decentralized Finance (DeFi) technologies.
In a recent referendum, the community accepted the reorganization proposal by a margin of more than 90%. The dYdX Operating Trust (DOT) will be converted into a Cayman Islands foundation corporation known as the dYdX Foundation.
The next step is to draft the DOF’s Memorandum and Articles of Association, granting effective power to the dYdX community.
The new structure is intended to protect dYdX contributors from any legal difficulties as the US Securities and Exchange Commission (SEC) increases its emphasis on DeFi. While dYdX does not operate in the United States, regulators there have a history of chasing cryptocurrency projects globally.
The Cayman Islands, a British colony, is a favorite destination for cryptocurrencycurrency enterprises looking for more lenient regulatory regimes. The liberal framework for digital assets makes it an appealing alternative for businesses seeking to evade tighter laws, such as those in the United States.
Part of the Cayman Islands’ attraction stems from its regulations, which allow multinational corporations to create foundation companies. These limited liability structures provide a “separate legal personality,” which protects the personal finances of people operating the company in the event of a lawsuit.
Several DeFi projects have recently received regulatory inquiries or legal threats. Last year, the SEC subpoenaed SushiSwap and its primary contributor, Jared Grey, raising fears about possible enforcement action. Similarly, ShapeShift, a DeFi platform, settled a complaint with US securities regulators this month for $275,000.
dYdX’s shift to the Cayman Islands represents a rising trend in the DeFi market, where companies seek more favorable regulatory settings.
