FameEX Hot Topics | SEC Takes Firm Position, Requiring DeFi to Adhere to Securities Regulations

The recent decision by the SEC to incorporate decentralized finance (DeFi) into its proposal for a new exchange definition has generated uncertainty in the crypto industry. For an extended period, the industry has been appealing for precise regulations or guidance from the SEC, which would provide digital asset businesses with certainty about how to comply with or avoid the agency's jurisdiction. Nevertheless, the SEC's recent decision has highlighted that the crypto financial movement will not receive specific regulations. Instead, the agency is making specific adjustments to its rules to ensure that crypto adheres to existing securities regulations.

SEC Commissioner Hester Peirce criticized the SEC's move, stating that they are not willing to make any accommodations to incorporate new technology. Peirce mentioned that if crypto operations do not resemble incumbent firms, the SEC would be content with eliminating them or forcing them to transform into centralized entities. The SEC voted 3-2 to reopen an existing proposal, intending to bring in new technologies that would now encompass DeFi, to broaden how it defines operations that need to be regulated as securities exchanges.

Crypto operations would have to determine whether to make significant changes such as increased centralization to comply with this and other SEC initiatives. Some of these modifications could endanger what sets apart their approach to money and investment. This move has caused concern among crypto experts, who are apprehensive that the SEC's actions will restrict innovation and constrain industry growth.

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 present, the SEC's stance on crypto can only be altered by legislation from Congress or legal outcomes, such as the result of its legal battle with Ripple Labs regarding whether XRP is an unregistered security. The industry is hopeful that the SEC will provide transparent guidance, allowing them to operate within the law and without fear of regulatory action. However, the SEC's recent actions have created 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.