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Increased Regulatory Scrutiny of DeFi by SEC Sparks Worries About Innovation and Competition

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Gherardo Fiorenzo
Gherardo Fiorenzo is an Italian author with a unique perspective shaped by his experiences in Italy and the US. His thought-provoking articles, short stories, and reviews explore the intersections of language, identity, and culture.

US Securities and Exchange Commission Takes Closer Look at Decentralized Finance (DeFi), Raising Concerns About Possible Stifling of innovation f competition in a rapidly developing industry.

The US Securities and Exchange Commission is increasing its focus on cryptocurrency sector, with President Gary Gensler clear That DeFi will not be exempt. Supreme Education Council announced It would recheck plans to modify the profile of An exchange, which can include DeFi protocols such as decentralized exchanges.

in rule proposed at the beginning in the previous yearThe Securities and Exchange Commission seeks to include language targeting digital asset specialization.

Gensler emphasized that many cryptocurrencies trading platforms already fall under the current definition of exchange thus required to comply with Securities laws. He assured that investors in crypto markets should Get the same protection as these in traditional markets.

However, not all organizers welcomed the idea. SEC Commissioner Hester Pierce criticized the proposal overly broad, claiming that it will hinder innovation and competition in the financial Markets while protecting existing companies. she also He argued that the plan’s vagueness could undermine basic First Amendment protections.

DeFi aims to simplify financial Transactions such as loans and interest earnings by making it faster, more Accessible, automated through decentralization apps. these apps Enable trading and borrow of encryption assets Without third party intermediaries or need to reveal the personality information.

While DeFi has gained praise for Decentralization that it provides to users also has been criticized for its lack of protection, with Experimental platforms that are vulnerable to hacking.

Decentralized exchanges (DEXs) such as Uniswap and Curve Finance are among the most popular decentralized exchanges. apps. These platforms allow users trade Cryptocurrency anonymously information.

Some users have expressed doubts about the SEC ability to enforce its regulations outside The United States, asserting that the agency could not force compliance.

Critics in the crypto industry, like Jason Allegrante, compliance officer at Fireblocks, have also Expressed concerns that apply traditional Exchange systems to decentralized protocols may stifle innovation in United States and drive business abroad.

the use of VPNs allow users to bypass location- Constraints based and access encryption apps Even if they are banned in their country. Some DEXs have it already They have taken measures to prevent US-based users from accessing their platforms.

The Securities and Exchange Commission has targeted prominent US cryptocurrency brands including Coinbase and Kraken, stepping up its crackdown after sudden bankruptcies. of digital asset Giant FTX in November.

And Gensler has consistently maintained that digital assets They fall under the definition of securities, and regulators scrutinize the DeFi sector for sometimes. Last year, the Treasury Department sanctioned the “currency mixer” app Tornado Cash, which North Korean hackers allegedly used to launder money.

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