U.S. SEC Plans to Expand Definition of "Broker-Dealer" to Include Digital Assets, Crypto Community Concerned DeFi Could Be Severely Impacted
The U.S. Securities and Exchange Commission (SEC) has redefined and expanded the definition of securities dealers to include digital assets, a move viewed as a "sneak attack" by the crypto community, raising concerns that it could weaken decentralized finance (DeFi).
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According to a report from Coindesk, this 200-page proposal appears to be about electronic trading of U.S. Treasuries, but a footnote in the text indicates that these rules also apply to digital assets, suggesting that digital assets may be considered securities.
Gabriel Shapiro, legal counsel for cryptocurrency firm Delphi Digital, called the proposal a "comprehensive shadow attack on decentralized finance" on Twitter. If the proposal to classify DeFi as securities is accepted and enforced, it could stifle innovative technologies.
it's an all-out shadow attack on decentralized finance https://t.co/MSfwDYftgU
— _gabrielShapir0 (@lex_node) March 28, 2022
The SEC proposal would bring all automated market makers (AMMs) and liquidity providers with total assets exceeding $50 million under SEC oversight, requiring them to comply with SEC registration requirements. Therefore, any decentralized exchange not registered with the U.S. Securities and Exchange Commission may be considered an unregistered dealer, which is a serious offense under securities laws.
Some lawyers believe that including cryptocurrencies as a footnote in a massive proposal is deliberately adding confusion and uncertainty to the cryptocurrency market, and that while the SEC's registration requirement seems clear, it is actually ambiguous as the entire proposal does not mention "DeFi" at all.
The SEC just proposed a rule that would expand the definition of regulated "dealers" to include people who "employ passive market making strategies" that have "the effect of providing liquidity" to others.
It's 200 pages but doesn't say "DeFi" even once. https://t.co/nB9TVQrZ7R
— Jake Chervinsky (@jchervinsky) March 28, 2022
Shapiro believes that the SEC's true intention is not to have DeFi participants register, but rather to issue a prohibition disguised as a registration requirement.
This article is authorized for reprint from Horizon News Network.