DeFi Under Fire: SEC’s Intensified Crackdown Sparks Controversy

Decentralized Finance (DeFi) is facing increased regulatory scrutiny as the Securities and Exchange Commission (SEC) reopens the comment period on proposed amendments to the definition of “exchange” under Exchange Act Rule 3b-16. The proposed amendments were initially put forward in January 2022, and the SEC reopened the comment period in May 2022, which closed on June 13, 2022.

DeFi Future In Jeopardy?

The SEC’s proposal aims to provide “regulatory oversight” of platforms that trade crypto assets to what they called “securities,” including DeFi protocols, which operate on a decentralized, peer-to-peer network.

According to the announcement, the proposed amendments would subject DeFi protocols and other platforms that trade “crypto asset securities” to additional regulatory requirements, such as registration as national securities exchanges or compliance with reporting and recordkeeping obligations. SEC Chair Gary Gensler commented:

I believe this supplemental release will help address comments on the proposal from various market participants, particularly those in the crypto markets.

In his statement, SEC Chair Gary Gensler further emphasized that many crypto trading platforms already fall under the current definition of an exchange and are thus subject to existing securities laws. Gensler also alleged that investors in the crypto market “deserve the same protections” as those in other markets and that the SEC’s proposed regulations are intended to provide it.

Additionally, Gensler noted that the proposed regulations are subject to public comment and encouraged investors and other stakeholders to provide input on all aspects of the proposal. He emphasized that the SEC is committed to ensuring that the crypto market operates in a “fair and transparent manner” and that these regulations are an important step in achieving that goal.

Per the announcement, once the reopening release is published in the Federal Register, the 30-day comment period will begin. During this period, interested parties can submit comments to the S

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Author: Ronaldo Marquez

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