https://www.theblock.co/post/226344/sec-poised-to-increase-scrutiny-of-defi
The U.S. Securities and Exchange Commission removed any doubt that they plan to police decentralized finance.
The commission declared on Friday that rules governing trading exchanges in the U.S. also apply to decentralized finance. The procedural move isn’t a change to rules, but rather an effort to make explicit whether existing exchange rules apply to decentralized finance. The proposed clarification and amendments to the definition of an exchange are subject to a vote by the Democratic majority commission that leads the agency, making them likely to pass.
The action formalizes the SEC’s assertion of jurisdiction over activities labeled "decentralized" that the agency sees as still falling under traditional definitions of securities trading. It may also signal increased scrutiny by the regulatory agency into that area of digital assets. So far the SEC has focused more on centralized crypto firms.
“Make no mistake: many crypto trading platforms already come under the current definition of an exchange and thus have an existing duty to comply with the securities laws,” SEC Chair Gary Gensler said in prepared remarks for Friday's meeting. “Yet these platforms are acting as if they have a choice to comply with our laws. They don’t.”
Republican appointees to the commission strongly dissented with the announcement.
“No longer does this commission think creatively about regulatory alternatives that advance the commission’s mission while preserving space for potentially disruptive innovation. No longer does the commission worry that regulatory bullheadedness often produces absurd consequences,” said Commissioner Hester Peirce, blasting the application of exchange rules to decentralized finance. “Rather today’s commission aggressively expands its regulatory reach to solve problems that do not exist.”
Fellow Republican Commissioner Mark Uyeda added criticism of the expansion of exchange definitions to DeFi.
“Where is the evidence that more entities need to be brought into the regulatory framework for exchanges?” said Uyeda, noting that false and misleading statements and market manipulation rules already apply to non-exchanges.
The five-member commission passed the announcement along party lines, by a vote of 3-2.
DeFi projects that bring together multiple buyers and sellers for the trading of assets, including non-firms and structured projects, could be considered securities exchanges by the SEC, and subject to civil charges if they fail to register as national securities exchanges or broker-dealers in the U.S. The exchange definition is tied to "trading interest," according to SEC staff.
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