On Friday, the US Securities and Exchange Commission (SEC) made changes to a proposed rule, making it more explicit that digital asset exchanges and decentralized finance (DeFi) platforms must register with the regulator. The aim of the SEC’s plan, which was first proposed in 2022, is to close a regulatory gap created by platforms that offer trading in securities but don’t register as exchanges or brokerages. The updated plan adds language specific to digital assets that the regulator believes fall under its purview.
Although the SEC’s initial proposal did not mention cryptocurrency, it was widely considered applicable to digital assets, causing backlash from firms such as Coinbase and Circle Internet Financial, as well as one of the agency’s own commissioners.
SEC Chair Gary Gensler stated before the meeting on Friday that “many of them currently are exchanges, regardless of the reopening release we’re considering today,” adding that investors in the crypto markets must receive the same protections that the securities laws provide in other markets. The SEC believes that the revised proposal would capture around a dozen additional small digital asset firms, with many seeking exemption under the Alternative Trading System exemption.
The SEC says that its current rules already cover larger exchanges that trade tokens deemed to be securities. Hester Peirce, one of the SEC’s two Republican commissioners, voiced her concerns that the proposal would only protect incumbent players and accused the agency of being uninterested in promoting innovation and competition in the financial markets.
The commission approved the reopening of the proposal by a 3-2 vote along party lines. The SEC will allow public comment for 30 days after the reopening notice is published in the Federal Register before incorporating feedback into a final version of the proposal. This version must also be approved by a majority of the commission.