The United States Securities and Exchange Commission (SEC) has announced that it will review the proposed redefinition of “exchange” according to the agency’s rulesa measure that could include participants in the cryptocurrency market of decentralized finance or DeFi.
In an open meeting held on April 14 with SEC commissioners and staff, President Gary Gensler said that the proposed rule changes could benefit investors and markets by subjecting certain intermediaries to additional regulatory scrutiny, as well as “modernizing” the rules that define an exchange. Under the proposal, an “exchange” would be more precisely defined as a system that “brings together buyers and sellers of securities using structured methods to trade a trade” and would explicitly include DeFi.
“This would take into account the evolving nature and electronicization of trading platforms over the last 25 years,” Gensler said.
The commission proposed similar amendments in January 2022, keeping the public comment period open until June. Some cryptocurrency advocacy groups criticized the SEC’s actions at the time, suggesting it was an overreach of the commission’s authority that could jeopardize participation in the space.
Gensler added:
“Given the way cryptocurrency trading platforms operate today, many of them are currently exchanges, regardless of this reopening pitch that we are considering today. These platforms combine orders from multiple buyers and sellers of cryptocurrency using established non-discretionary methods. That is the definition of an exchange, and today, most cryptocurrency trading platforms meet it.”
SEC Commissioner Hester Peirce, also known as “cryptomom” for many of her pro-crypto political stances, raised concerns about rules regarding trading platforms that do not handle security-qualified tokens, or how to address them. to traders moving from securities to non-securities trading. He added that there was “a lot of ambiguity” about the SEC’s current treatment of securities.
“It is possible that operating a system that uses these technologies to conduct exchange activities under the proposed rules in a manner that is compliant with applicable regulations could significantly reduce the degree of decentralization of the system,” Peirce said. “Have we thought about how it would benefit the American public to force centralization… It seems perverse to me that we are encouraging centralization.”
After the meeting, the sec reiterated that DeFi projects fell within the commission’s current rules. The US Treasury Department also took aim at DeFi services in an April 6 warning relative to money laundering and the financing of terrorism.
The public comment period for the proposed amendment will be open for 30 days after its publication in the Federal Register.
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