U.S. SEC wants to regulate DeFi similar to CeFi, Commissioner Peirce disagrees
– The SEC declared that it will reopen an old proposal that expressly includes DeFi exchanges under its purview, inviting criticism from Commissioner Peirce.
– SEC Chair Gensler has long contended that the large majority of crypto assets are subject to securities laws.
The U.S. Securities and Exchange Commission (SEC) has declared that it will reopen an old proposal concerning consumer protection legislation. The proposal will be modified to expressly include digital asset trading under its purview.
The plan is to regulate cryptocurrency exchanges, including decentralized finance (DeFi) exchanges.
The reopening of the old plan, according to the SEC’s latest press release, reiterates that existing laws governing securities exchanges also apply to digital asset trading platforms and so-called “DeFi” systems.
The original proposal, made in January 2022, aimed to broaden existing exchange legislation to include systems that “provide protocols to bring together buyers and sellers for trading any type of security.” These systems would be needed to register as exchanges or broker-dealers and to follow Alternative Trading System laws.
SEC Commissioner Pierce criticizes existing regulations
The proposal did not specifically reference crypto or DeFi. But the ambiguity of its terminology sparked concerned reactions from pro-crypto SEC commissioner Hester Peirce. The revisions proposed recently would cover crypto asset trading and DeFi exchanges.
The latest revisions, according to Commissioner Peirce, serve to
“Embrace stagnation, force centralization, urge expatriation, and welcome extinction of new technology.”
Commissioner Peirce further said that adopting existing regulations to DeFi would result in confusing and unworkable standards for network participants. This includes blockchain miners and validators that support its related protocols.
Furthermore, she questioned the ability of DeFi participants to meet exchange or broker-dealer registration standards and whether such registrations were necessary for DeFi.
SEC Chair Gensler has long contended that the large majority of crypto assets are subject to securities laws. Moreover, cryptocurrency exchanges should be subject to the same regulations and restrictions as regular trading platforms.
In contrast, Peirce frequently criticizes the Chair for attempting to fit a fresh and novel industry into a rulebook that wasn’t designed for it.