- New rules expand oversight on crypto and DeFi by redefining “dealer” and requiring registration for specific activity and capital thresholds.
- Aims to protect investors but raises concerns about stifling innovation and creating uncertainty, with mixed reactions from industry and regulators.
- Rules take effect in 60 days, sparking debate and adaptation within the evolving digital asset landscape.
The Securities and Exchange Commission (SEC) has implemented a new rule requiring stricter oversight of market participants, including those in the cryptocurrency and decentralized finance (DeFi) sectors. This 247-page rule mandates compliance with federal securities laws for individuals significantly impacting liquidity within the market.
The rule applies to crypto assets considered securities or government securities, excluding individuals with less than $50 million in assets.
The rule will not apply to individuals with assets less than $50 million.
Notably, it encompasses decentralized finance, with the SEC stating that those engaging in a regular pattern of buying and selling crypto asset securities as part of their business must register as dealers or government securities dealers.
The DeFi Education Fund criticized the SEC’s approach as “misguided and unworkable.”
Cody Carbone, Vice President of Policy for the Chamber of Digital Commerce, labeled the vote as an example of the SEC’s “continued hostility” towards the digital asset industry.
Concerns were raised about the lack of dialogue with the industry, as the proposed 200-page rule initially mentioned digital assets in a footnote.
Commissioner Hester Peirce, voted against the rule, questioned how automated market makers (AMMs) would register as dealers, considering they are essentially software protocols.
The SEC justified this by arguing that an AMM is more than just software.
However, the lack of transparency and compliance in the market raised further concerns during the discussion.
SEC Chair Gary Gensler defended the rule, emphasizing its necessity to protect investors in evolving markets. He argued that the measures are common sense, ensuring fair competition and leveling the playing field for all market participants.
“These measures are common sense. […] Absent an exemption or exception, if anyone trades in a manner consistent with de facto market making, it must register with us as a dealer – consistent with Congress’s intent.”
Gary Gensler
The final rules are set to become effective 60 days after publication in the Federal Register, with compliance required one year thereafter.
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