SEC’s Revised Definition of ‘Dealer’ Raises Concerns About Impact on Crypto Innovation
The U.S. Securities and Exchange Commission (SEC) recently implemented rules requiring firms that operate like dealers to register with the Commission. This move has sparked worries about its potential repercussions on decentralized finance (Defi) and the broader crypto industry.
SEC Chair Gary Gensler expressed support for the adoption of these rules, emphasizing the importance of firms acting as dealers to register with the Commission. However, legal experts and industry insiders have raised concerns about the implications of these regulations, particularly for Defi platforms and decentralized exchanges (DEXs).
Jake Chervinsky, chief legal officer at Variant, highlighted that the SEC’s new rules specifically target liquidity providers (LPs) of DEXs with assets exceeding $50 million. He noted that the SEC’s approach appears to target Defi by broadening the definition of ‘dealer’ to include entities that may not fit within the traditional framework.
Chervinsky cautioned that the SEC’s proposed rule lacks legal and policy coherence, potentially stifling innovation and exceeding the Commission’s statutory authority. Despite receiving criticism during the rulemaking process, the SEC proceeded with finalizing the rule, albeit with certain exceptions for smaller entities.
The Blockchain Association’s Head of Legal, Marisa Coppel, echoed these concerns, emphasizing that the revised definition of ‘dealer’ imposes unrealistic requirements on Defi projects. She highlighted the lack of clarity provided to market participants and warned of potential negative consequences for innovation within the digital asset ecosystem.
Overall, the SEC’s revised definition of ‘dealer’ has raised significant concerns within the crypto community, with stakeholders expressing apprehension about its impact on Defi and broader crypto innovation. As the industry grapples with regulatory uncertainty, the future implications of these rules remain uncertain.
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