dYdX Operation Trust plans to shift operations to the Cayman Islands. This move comes as U.S. regulators increase their scrutiny of Decentralized Finance (DeFi) protocols.
The community overwhelmingly approved the restructuring plan in a recent referendum, with over 90% voting in favor. dYdX Operating Trust (DOT) will transform into a Cayman Islands foundation company, known as the dYdX Foundation.
The next step is to Draft the Memorandum & Articles of Association of the DOF and grant effective control to the dYdX Community.
The new structure aims to shield dYdX contributors from potential legal issues as the US Securities and Exchange Commission (SEC) steps up its focus on DeFi. While dYdX doesn’t operate within the US, regulators there have a history of pursuing crypto projects internationally.
The Cayman Islands, a British territory, is a popular destination for crypto firms seeking friendlier regulatory environments. The lax framework for digital assets makes it an attractive option for companies looking to avoid stricter regulations like those in the US.
Part of the Cayman Islands’ appeal lies in its laws allowing international businesses to establish foundation companies. These limited liability structures offer a “separate legal personality,” protecting the personal finances of those managing the company in case of lawsuits.
Several DeFi projects have faced inquiries or legal threats from regulators in recent times. Last year, the SEC subpoenaed SushiSwap and its key contributor, Jared Grey, sparking concerns about potential enforcement actions. Similarly, DeFi platform ShapeShift settled a lawsuit with US securities regulators for $275,000 last month.
dYdX’s move to the Cayman Islands reflects a growing trend within the DeFi space as companies seek more accommodating regulatory environments.
