Decentralized exchange dYdX DYDX
-6.29%
is planning to move some of its operations to the Cayman Islands as US regulators turn their attention to decentralized finance protocols (DeFi).
The restructuring plan was approved on Sunday by more than 90% to vote will transfer the dYdX Operating Trust (DOT) to a Cayman Islands foundation company, the dYdX Foundation, in a community referendum said in an X message. This move could protect dYdX contributors from legal threats as securities regulators in the US show signs of cracking down on DeFi protocols.
Although dYdX does not operate in the US, regulators there can and have run crypto projects based outside their jurisdiction. A representative for dYdX was not immediately available to respond to The Block’s request for comment.
The Cayman Islands is hardly a surprising destination for the reinvention of DOT, a pooled fund launched last year with nearly $400,000 in tokens earmarked for dYdX’s governance and operational initiatives. That’s because the British territory has a lax regulatory framework for digital assets, making it an attractive destination for crypto companies looking to offshore their operations to avoid confusion with more hostile regulators like those in the US.
As part of its crypto-friendly laws, the Cayman Islands allows international companies to set up foundation companies within its borders. These limited liability corporate vehicles maintain “separate legal personality,” meaning the personal finances of those who manage them are protected in the event the company is taken to court. according to to a blog post by offshore law firm Carey Olsen.
In recent years, several DeFi projects have received inquiries or even legal threats from regulators. In 2023, the US Securities and Exchange Commission (SEC) subpoenaed SushiSwap and its main contributor, Jared Gray, raising concerns that the protocol could become the target of an enforcement action brought by the agency. Meanwhile, DeFi platform ShapeShift paid $275,000 last month to settle a lawsuit filed against the platform by US securities regulators, an SEC notification shows.
