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FameEX Hot Topics | SEC Asserts DeFi Must Comply With Securities Rules, Revealing Its Position

2023-04-18 11:20:45

The SEC's recent decision to include decentralized finance (DeFi) in its proposal for a new exchange definition has caused uncertainty for the crypto industry. For a long time, the industry has been pleading for specific rules or guidance from the SEC that would give digital asset businesses certainty about how to comply or steer clear of the agency's jurisdiction. However, the agency's recent decision has further underlined that the crypto financial movement won't get tailored regulations. Instead, the agency is making targeted adjustments to its rules to ensure that crypto will be held to existing securities regulations.


SEC Commissioner Hester Peirce criticized the agency's move, stating that they are not willing to make any adjustments to accommodate new technology. Peirce stated that if crypto operations do not look like incumbent firms, the SEC will be fine with killing them off or forcing them to turn themselves into centralized entities. The SEC voted 3-2 to reopen an existing proposal to widen how it defines operations that need to be regulated as securities exchanges, aiming to bring in new technologies that would now include DeFi. 
To comply with this and other SEC initiatives, crypto operations would have to decide whether to make fundamental changes such as increased centralization. Some of those changes could threaten what's different about their approach to money and investing. This move has caused concern among crypto experts who fear that the SEC's actions will stifle innovation and limit growth in the industry.


According to Jason Gottlieb, a lawyer with crypto clients at Morrison Cohen in New York, "The SEC is simply seeking to ban DeFi protocols in America. In doing so, the SEC is substituting its own opinions for Congress' prerogative on a major question, central to the future of the American economy."
At this stage, the SEC's approach to crypto could only be steered in a different direction by legislation from Congress or developments in court cases, such as the outcome of its legal dispute with Ripple Labs over whether XRP is an unregistered security. The industry is hoping that the SEC will provide clear guidance that will allow them to operate within the law and without fear of regulatory action. However, the recent move by the agency has caused uncertainty and raised concerns about the future of the crypto industry.

Disclaimer: The information provided in this section is for informational purposes only, doesn't represent any investment advice or FameEX's official view.

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