Home
News
- 1 The SEC opened a discussion, which could rebrand Defi protocols as exchanges and its tokens as securities.
- 2 The SEC opened a discussion, which could rebrand Defi protocols as exchanges and its tokens as securities.
The U.S. Securities and Exchange Commission Chair Gary Gensler says that crypto belongs in the securities world and will be regulated that way. The agency is trying to rebrand digital assets as securities, like Ripple vs SEC. Now, the SEC is expanding the definition of “Exchange” and bringing DeFi under the securities rules.
Defi Could Be Securities Now, Says SEC
The crypto industry has been asking for guidance and rules from the SEC tailored to the digital assets business. But the new decision of bringing Decentralized Finance (DeFi) under the expanding definition of “Exchange” clears the doubt that they are not getting customized regulations. Moreover, multiple digital assets would also be under the definition of securities and should comply with the existing rules.
The SEC has formally reopened the 2022 discussion regarding the definition of exchange for the second time. Following the dialogue between officials, DeFi protocols might be rebranded as exchange, and DeFi tokens could fall under securities rule.
While speaking to a crypto media outlet, SEC Commissioner Hester Pierce said that the agency is not in favor of adjusting to accommodate crypto.
The latest discussion reopens the possibilities of widening the definition of “exchange” and bringing new technology under the umbrella, including DeFi protocols. For compliance with the SEC, the crypto entities must consider making fundamental changes. These may include increased centralization and may affect their monetary policies.
The SEC and the Crypto Industry
Gary Gensler says the crypto investor should also receive the benefits of time-tested securities law.
The U.S. SEC has been very strict on the crypto industry; lately, Coinbase received Wells Notice for offering unregistered securities in the form of its tokens and staking services. The infamous case of Ripple vs. SEC has been going on since December 2020, when the agency is trying to rebrand XRP as a security.
The proposed rules say that the custody of the crypto assets should be outside the industry. Probably in a bank or other financial institutes, as the KYC and AML laws bind them, the government can have the investors’ data and save the assets in any unforeseen event.
In a testimony prepared for an April 18 House Financial Services Committee hearing, SEC Chair Gary Gensler argues, “Nothing about the crypto markets is incompatible with the securities laws.” During the hearing, the SEC chair should face the Republican-majority committee for the first time in 2023.
The SEC is in full swing in the ring with the crypto industry, and the outcome of the bout could be altered after the development of the crucial Ripple vs. SEC case or from any crypto-friendly legislation from Congress.
Gensler thinks that if the crypto entities portray themselves as exchanges, custodians, and clearinghouses, they should be registered and operate under federal oversight. But some analysts believe that if Defi protocols maintain the peer-to-peer level and the companies do not engage in transactions, they might circumvent the regulations.
Even after the rule is passed, the enforcement division will make the final call for their implementation, says Pierce.
Disclaimer-
The views and opinions stated by the author, or any people named in this article, are for informational purposes only, and they do not establish financial, investment, or other advice. Investing in or trading crypto assets comes with a risk of financial loss.
Andrew is a blockchain developer who developed his interest in cryptocurrencies while pursuing his post-graduation major in blockchain development. He is a keen observer of details and shares his passion for writing, along with coding. His backend knowledge about blockchain helps him give a unique perspective to his writing skills, and a reliable craft at explaining the concepts such as blockchain programming, languages and token minting. He also frequently shares technical details and performance indicators of ICOs and IDOs.
