The U.S. Securities and Exchange Commission has announced that it will review a proposed redefinition of "exchange" under the agency's rules — a move that could include cryptocurrency market participants in decentralized finance (DeFi).
In an April 14 public meeting with SEC commissioners and staff, SEC Chairman Gary Gensler said the proposed rule amendments could subject certain brokers to additional regulatory scrutiny as well as define trading “modernize” the rules of the exchange, thereby benefiting investors and the market. According to the proposal, an “exchange” would be more closely defined as a system that “brings buyers and sellers of securities together through a structured method to negotiate transactions,” and explicitly includes DeFi. "This would explain the evolving nature and digitization of trading platforms over the past 25 years," Gensler said.
The committee proposed a similar amendment in January 2022, keeping the public comment period open until June. Some cryptocurrency advocacy groups criticized the SEC’s action at the time, arguing it was an excessive interference with the commission’s powers that could jeopardize participation in the space. Gensler added: “Given the way cryptocurrency trading platforms operate today, many of them are currently exchanges, regardless of the reopening versions we are considering today. These platforms match orders from multiple buyers and sellers of crypto securities using an established non-discretionary method. This That’s the definition of an exchange, and today, most cryptocurrency trading platforms fit it.”
SEC Commissioner Hester Peirce, also known as "Crypto Mom" for many of his pro-crypto policy stances, would have little to say about rules for trading platforms that don't handle tokens that qualify as securities, or how to address operations that switch from securities to non-securities Traders Raised Concerns - Securities Trading. She added that the SEC's current approach to securities is "very vague."
“Running a system that uses these technologies to perform exchange activities under the proposed rules in a manner consistent with applicable regulations could significantly reduce the degree of decentralization of the system,” Peirce said. What good? It seems counterintuitive to me that we would encourage centralization.”
