Decentralized finance (DeFi) faces increased regulatory scrutiny as the U.S. Securities and Exchange Commission (SEC) reopens the comment period on proposed amendments to its definition of an “exchange.” Exchange Act Rule 3b-16The proposed amendments were originally filed in January 2022, and the SEC resumed the comment period in May 2022, ending on June 13, 2022.
Is the future of DeFi in jeopardy?
The SEC proposal aims to provide “regulatory oversight” for platforms trading crypto assets into what are called “securities,” including DeFi protocols that operate on decentralized peer-to-peer networks.
According to the announcement, the proposed amendment would impose additional regulatory requirements on DeFi protocols and other platforms trading “cryptocurrency securities,” such as registration as a national stock exchange or compliance with reporting and recordkeeping obligations. It will be. SEC Chairman Gary Gensler commented:
We believe this supplemental release will help address the comments on the proposals from various market participants, especially crypto market participants.
In a statement, SEC Chairman Gary Gensler further emphasized that many cryptocurrency trading platforms already meet the current definition of an exchange and are subject to existing securities laws. Gensler also argued that crypto market investors “deserve the same protections” as investors in other markets, and that the SEC’s proposed regulation is intended to provide that. bottom.
Additionally, Gensler noted that the proposed regulation is subject to public comment and encouraged investors and other stakeholders to provide input on all aspects of the proposal. He stressed that the SEC is committed to ensuring crypto markets operate in a “fair and transparent manner” and these regulations are an important step towards achieving that goal. .
According to the announcement, a 30-day comment period will begin once the reopening release is published in the Official Gazette. During this period, interested parties may submit comments to the SEC electronically or in writing. The SEC will review and use all comments received to inform proposed changes to the regulations.
The SEC is divided on the future of DeFi
in dissenting opinion statementSEC Commissioner Hester Pearce has criticized regulations proposed by the Securities and Exchange Commission, embracing “stagnation, centralization, deportation, and extinction” instead of accepting the promise of new technology. claimed.
Pierce argued that the proposed regulation would stifle innovation in the crypto market by forcing centralization and discouraging innovation. She also expressed concern that regulation could facilitate the deportation of blockchain innovators as they seek a more favorable regulatory environment outside the United States.
Pierce also criticizes the commission for dismissing the possibility of real adjustments to the registration framework that would make it easier for entrepreneurs to register. Instead, Pearce claims the commission is responding to the goodwill of entrepreneurs with enforcement actions, suggesting the SEC does not support innovation in the crypto market.
Pierce also criticizes the SEC’s “nonchalant” approach to the proposed rule, which she believes contrasts sharply with the SEC’s approach a quarter century ago. She suggests that the SEC’s current approach is “disinterested” in promoting innovation and competition in the financial markets and instead seeks to protect “incumbents.” Commissioner Pierce concluded:
We extend the statutory definition of “exchange” beyond its rational interpretation to arrive at a poorly defined set of activities for which there is no evidence that investors will benefit. We do so with a nonchalant laugh at the consequences.
As the SEC considers public comment on the proposed regulation, the task for the Commission is to strike a balance between protecting investors and promoting innovation while addressing the concerns of dissenting voices like Pierce. is.
Featured image on Unsplash, chart on TradingView.com