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- 1 Earlier, the SEC had proposed an amendment seeking to regulate decentralized exchanges.
- 2 Crypto community opposed the step, and now, Paradigm presents its arguments.
The tussle between the financial regulator and crypto companies does not seem to settle down soon. Prominent crypto VC, Paradigm, has challenged a step earlier taken by the US SEC. The firm is pushing back the regulator’s attempt to redefine “exchange.”
The San-Francisco based VC firm sent a letter citing the agency’s proposal for redesigning the term “exchange” in a 14-page long document sent to Vanessa Countryman, secretary at the SEC.
The United States Securities and Exchange Commission (SEC) proposed a revision in the existing definition of the term “exchange.” It was seeking the amendments in the 1934 Securities Exchange Act. Given the reasoning that decentralized exchanges (DEXs) also have the term “exchange,” the agency seeks its treatment similar to the stock exchanges or securities.
Paradigm argued the treatment of DEXs similar to exchanges, citing the term “exchange” given in the Act, is “invalid and incoherent.” It stated the agency is willing to pursue the same way that confused the crypto exchanges like Coinbase for registering as a security, which they could not do fundamentally. Failing to do so, made Coinbase fall for regulatory actions. Now, the SEC seeks DEXs to meet the similar fate.
The broader crypto community has raised concerns that if the proposal gets an approval, then the agency could gain the authority to bring the currently out of the reach decentralized exchanges, under the agency’s jurisdiction.
Decentralized exchanges do not serve intermediaries, organizations, or association of people for their offerings as an exchange, Paradigm noted. The market-making algorithm handles the operations at the cryptocurrencies’ pools and makes it accessible for buyers and sellers. Blockchain network powered self-executable smart contracts enables DEXs to operate as they do rather than a group of people akin to traditional exchanges.
Ramping up Enforcement Actions from SEC
The overall decentralized finance industry and the global crypto market is heating up following the recent regulatory action from the SEC against the leading crypto exchange in the US, Coinbase, and the world’s biggest crypto exchange earlier. Though the charges were deemed as the agency’s efforts to slam the industry, it resulted in a reverse impact.
The global cryptocurrency market started falling at the time of news surfacing all over, but calmed down soon. The overall market capitalization holds over 1.1 Trillion USD and the leading cryptocurrencies, Bitcoin (BTC) and Ethereum (ETH), are stable for now, despite the uncertainties.
Currently, Bitcoin (BTC) is trading at 26,472 USD after a drop of over 2% in the last 7 days. Ethereum (ETH) is maintaining at 1,834 after sliding up to 2.8% in the similar timeframe.
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.
