SEC’s Gensler Takes On Crypto DeFi Exchange With Updated Rule Plan
(Bloomberg) — The U.S. Securities and Exchange Commission on Friday amended a proposed rule to make more explicit that digital asset exchanges and decentralized financial platforms must register with the regulator.
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The SEC’s plan, first proposed in 2022, is intended to close a regulatory gap created by platforms that offer securities trading but do not register as exchanges or brokerages. The agency’s revised plan adds language specific to digital assets, many of which the regulator says fall under its purview.
Although the SEC’s original proposal did not mention crypto, it was considered applicable to digital assets. This ambiguity prompted a wave of criticism from crypto firms including Coinbase Global Inc. and Circle Internet Financial, as well as one of the agency’s own commissioners.
“Given how crypto trading platforms operate, many of them are currently exchanges, regardless of the reopening release we are considering today,” SEC Chairman Gary Gensler said in a statement before a meeting to vote to reopen the plan for public comment on Friday. “Investors in the crypto markets must receive the same time-tested protections that securities laws provide in all other markets.”
The SEC says the new proposal would catch another small number of digital asset firms, about a dozen, whose platforms use certain communication protocols to match buyers and sellers. Many of the newly covered platforms under the proposal are likely to seek exemptions from the rules under the alternative trading system, SEC chief economist Jessica Wachter said during Friday’s meeting.
The agency says its current rules already cover major exchanges that trade tokens the SEC considers to be securities.
Hester Peirce, one of the SEC’s two Republican commissioners, said during a Friday meeting that the proposal would only serve to protect incumbent players and described the agency as “disinterested in facilitating innovation and competition in the financial markets.”
The five-member commission approved the reopening of the proposal by a 3-2 vote along party lines. The SEC will take comments for 30 days after the reopening notice is published in the Federal Register before incorporating the public feedback into a final version of the proposal. That version, in turn, must also be approved by a majority in the commission.
–With assistance from Allyson Versprille.
(Updates with details on SEC vote in first and last paragraph, commissioner comment in seventh paragraph.)
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