Crypto Mom Hester Pierce Warns SEC’s New Proposal Poses Serious Threats To DeFi

Despite not mentioning cryptocurrencies, a new proposal made by the US Securities and Exchange Commission to amend the definition of “exchange” is raising concern in the crypto space. Hester Pierce, one of the five SEC commissioners, has warned that the proposal holds potential threats to decentralized finance (DeFi) platforms. The threat, as she points out, is in the expansiveness of the language which could give the SEC new powers to go after DeFi platforms if it is adopted.

DeFi protocols may be in danger of coming under scrutiny warns SEC commissioner, Hester Pierce

In correspondence with Bloomberg, SEC commissioner Hester Peirce has called out the US securities regulator for trying to extend its oversight to include decentralized finance platforms. Peirce stated that one of the latest proposals made by the SEC contained “very expansive language” that is indicative that the commission intended to use it against DeFi. This is especially alarming as Gary Gensler, the SEC chair, has previously stated his intention to regulate DeFi platforms she pointed out.

 The proposal includes very expansive language, which, together with the chair’s apparent interest in regulating all things crypto, suggests that it could be used to regulate crypto platforms. The proposal could reach more types of trading mechanisms, including potentially DeFi protocols, Pierce said.

Speaking about the proposal, SEC chair Gary Gensler previously stated that the amendments the proposal planned to make would bring more resilience and access to the treasury market. The proposal would achieve this by extending the existing regulations to reach more platforms that trade treasuries and other government securities. The SEC also claims that the proposal is intended to fill a regulatory gap created by platforms that are not registered as exchanges or brokerages but are trading all types of securities. Peirce sees DeFi platforms falling into this category should the proposed regulation become final.

The US crypto market continues to battle restrictive regulations

DeFi platforms, which have gained a lot of popularity of late, use smartcontracts to allow users to trade financial instruments without the need for any intermediaries. The protocols have been praised for their innovative use of blockchain technology to make investing permissionless, decentralized, and fairer for the average investor.

However, DeFi along with the rest of the crypto industry has continued to battle uncertain and even restrictive regulatory climate in the US. The SEC recently revealed that it will make crypto exchanges its target for regulation in 2022.

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