SEC regulates DeFi? Gensler threatens Web3

The SEC regulates DeFi? Its chairman, Gary Gensler, is threatening Web3. The authority could try to bring decentralized platforms under its supervision as well. The topic is currently gaining in importance as the industry in the USA is looking for a way out.

SEC regulates DeFi? Gensler threatens Web3

Since February, the US Securities and Exchange Commission has been increasingly attacking the US crypto industry. Will the SEC soon regulate DeFi alongside centralized companies? At least this development would be consistent if the chairman of the authority had his way. Gary Gensler wants to adapt the definition of a file-sharing service for this.

So far, the English word “exchange” specifically describes centralized companies. This is what the SEC was aiming for recently. Kraken and Binance were particularly affected . Recently, Bittrex has also come into focus.

However, as Reuters reports , the SEC plans to expand its powers on DeFi. “Exchange” should therefore also describe platforms that are based on automated protocols. This would also include Web3 with all its decentralized applications.

According to Reuters, the US crypto industry is currently looking for ways to avoid being crushed by the SEC. In order to continue the business, the centralized platforms apparently want to integrate dApps.

The idea is obvious. After all, the SEC has not yet tried to impose regulations on DeFi. Other US agencies have already done so. US Treasury sanctions have proved ineffective over the past few months.

SEC spokespersons believe that many DeFi applications are already covered by the previous definition and are therefore at least legally subject to the authority’s oversight.

According to her assessment, the new definition includes a dozen previously unregulated companies, since they are active as developers or operators of decentralized protocols.

How promising is the regulation of DeFi?

It is very unlikely that the SEC will succeed in enforcing regulations against DeFi. The functionality of dApps is based on not having to be subject to the specifications of a single instance.

The case of Tornado.Cash shows that authorities have little room for attack if the protocol does not submit. Only the developers themselves could be punished by the authorities. Since dApps live on blockchains , they remain unaffected at all times.

In order to take them offline, developers would sometimes have the option to use stop functions or self-destruct functions. Failing that, the only way to stop the protocol would be to destroy the entire blockchain network. However, this measure has not yet been taken.

Some politicians are disappointed with the leadership of Gary Gensler. They propose that the Democrat be fired from his post as SEC chairman . After an election in April 2021, the 65-year-old would normally remain in office until 2026.

Should a desired restructuring of the SEC succeed, Gensler would be fired. The legislature criticizes that the stock exchange supervisory authority would exceed its competence and harm domestic industry.