US Securities and Exchange Commission (SEC) Chair Gary Gensler emphasized the need to revise regulatory definitions for “exchange” and alternative trading systems (ATS) during his address at the US Treasury Market Conference.
While his speech focused on enhancing the efficiency and resilience of the US Treasury market, it also touched on the cryptocurrency and decentralized finance (DeFi) sectors.
Gensler claimed it is necessary to update the definition of an exchange to keep pace with the evolving landscape of trading platforms. He cited the rise of algorithmic and high-frequency trading strategies, which are now prominent in markets including digital assets, as one reason behind this.
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SEC’s Proposal To Expand Registration Requirements
The SEC’s proposal, initially introduced in 2022, aims to expand registration requirements to platforms acting as market makers for government securities.
However, the crypto community has raised concerns over the proposal’s broad language, fearing it could inadvertently impose traditional market regulations on digital asset platforms.
Critics argue that the proposed rules could force DeFi platforms and digital asset exchanges to register as exchanges or ATS, despite their fundamental differences from traditional market structures.
SEC Chair Gary Gensler emphasized a proposed rule change that could redefine “exchange,” potentially subjecting DeFi platforms to SEC regulations. The change has sparked concerns within the crypto community. #DeFi #SEC #DukeNukem
— Duke Nukem (@duke_kick_ass) September 26, 2024
Although Gensler did not explicitly reference DeFi in his speech, the language in the 2022 proposal suggests the SEC’s intention to extend its oversight to these platforms.
This has sparked debate within the crypto industry, as many believe that decentralized platforms, which operate without centralized control, should not be subject to the same regulatory framework as centralized exchanges.
Platforms like Prometheum and tZero, which have already registered as alternative trading systems, are navigating the changing regulatory environment by adhering to SEC requirements.
They represent early examples of how digital asset platforms might operate under the proposed rules.
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SEC Faces Intense Scrutiny In Congressional Hearing
As reported, the SEC faced a barrage of criticism during a congressional hearing on Wednesday, 18 September 2024. This came as a predominantly critical witness panel voiced their concerns over the agency’s regulatory approach towards digital assets.
The hearing, titled “Dazed and Confused: Breaking Down the SEC’s Politicized Approach to Digital Assets,” served as a preview of the full committee hearing on September 24, where all five SEC commissioners, including Chair Gary Gensler, testified before the House Financial Services Committee.
The two-hour session saw the SEC under fire from Republican lawmakers, crypto-friendly Democrats, and several witnesses who accused the agency of regulatory overreach and ambiguity.
The SEC has taken a tougher stance against crypto firms in 2024. More specifically, the regulator imposed nearly $4.7 billion in enforcement actions against crypto companies, a 3,018% increase from 2023.
The fines included forfeitures, disgorgement, civil penalties, settlements, and prejudgment interest, calculated from the time the SEC initiated each case.
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Disclaimer: Crypto is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. You could lose all of your capital.
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