SEC boss says DeFi platforms are ‘highly centralized’ and will need to register

Published at: Aug. 20, 2021

Gary Gensler, chairman of the United States Securities and Exchange Commission, stated that decentralized finance (DeFi) is highly centralized in certain aspects and urged projects working in the sector to register with the SEC.

Speaking to The Wall Street Journal on Thursday, Gensler suggested that the decentralized notions implied by the term DeFi were “a bit of a misnomer,” adding:

“These platforms facilitate something that might be decentralized in some aspects but highly centralized in other aspects.”

While DeFi projects are designed to be autonomous platforms that operate without a centralized authority, Gensler asserted that many are developed and controlled by a centralized team that is incentivized to promote its platforms.

“There’s still a core group of folks that are not only writing the software, like the open-source software, but they often have governance and fees,” he said, continuing, “There’s some incentive structure for those promoters and sponsors in the middle of this.”

Gensler expanded on his comments in a Friday interview with Fox Business and suggested that such DeFi projects are centralized enough to fall under the scope of regulation. He urged DeFi projects to register with the SEC:

“These so-called decentralized finance platforms actually have a lot of centralization. There’s a group of entrepreneurs that are running these platforms. They should come in and to that extent work with us and get registered.”

Earlier this month, SEC Commissioner Hester Peirce — colloquially known as “Crypto Mom” — echoed similar sentiments from a different angle when she warned of “shadow-centralization” within the DeFi sector.

Peirce stated that “if regulators can find a centralized part or group of people that they can grab hold of, they will grab hold of them,” as she urged for caution in how projects are built from the ground up.

“If you want to be decentralized, you really need to be decentralized, and that is going to then put you in a different category from the perspective of regulators because that’s just not something that we’ve dealt with before,” she said.

Related: Crypto-friendly CFTC commissioner Brian Quintenz reportedly plans to step down

Cointelegraph reported on Aug. 3 that Gensler had identified several crypto policy changes that are being examined by the SEC, including matters concerning DeFi, lending platforms, token offerings, stablecoins, exchange-traded funds and custody.

Tags
Sec
Related Posts
FTX poked the bear and the bear is pissed — O'Leary on the crypto crackdown
Shark Tank investor and venture capitalist Kevin O’Leary has urged crypto exchanges to “get on board with regulation” if they want to “stay out of the way” of Gary Gensler and the United States Securities Exchange Commission (SEC). In a Feb. 20 interview with TraderTV Live, O’Leary said that U.S. lawmakers are “fatigued” over crypto collapses and that they’re only going to get more ruthless if companies continue to not comply: “You got to get on board with regulation, you got to stay out of the way of Gensler at the SEC and other regulators. Those hombres [men] in Washington …
Adoption / Feb. 21, 2023
SEC doubles down on crypto regulation by expanding unit
The United States Securities and Exchange Commission (SEC) announced Tuesday that it would nearly double the number of personnel responsible for safeguarding investors in cryptocurrency markets. As per the announcement, the SEC’s Cyber Unit, which includes the Crypto Assets and Cyber team, will hire 20 new people for 50 dedicated positions. The SEC stated that the 20 hires would include investigative staff attorneys, trial lawyers and fraud analysts. Chair Gary Gensler praised the appointments as long overdue and essential to overseeing one of Wall Street’s newest and most popular sectors. This is welcome news to many who have been concerned …
Adoption / May 3, 2022
American regulators to investigate Genesis and other crypto firms
Cryptocurrency lending firm Genesis Global Capital and other crypto firms are under investigation by securities regulators in the United States, according to reports on Nov. 25. Joseph Borg, Alabama Securities Commission Director, confirmed that its state and several other states are participating in inquiries regarding Genesis' alleged ties to retail investors, including if Genesis and other crypto firms might have violated securities laws, Barron's reported. It is still unclear what other companies are being investigated. Borg noted that the investigation focuses on whether Genesis and other crypto companies influenced investors on crypto-related securities without obtaining the proper registration. The investigation …
Sec / Nov. 25, 2022
Crypto industry leaders ‘scared of a strong SEC’ — Senator Warren
United States Senator and crypto skeptic Elizabeth Warren wants the Securities Exchange Commission (SEC) to “double down” on its crypto enforcement efforts, highlighting that the cryptocurrency industry is running “scared” for what’s to come next. Warren’s comments came from an interview with American Economic Liberties Projects on Jan. 25. The Senator opined that since Gensler was sworn in as SEC Chairman in April, 2021, the Commission “has made a good start” on fixing some of the problems created by the former SEC leaders under the Trump Administration. Warren claimed that the previous SEC administration “essentially gave the green light” to …
Blockchain / Jan. 26, 2023
‘Agent of an anti-crypto agenda’ — Gensler slammed over Kraken crackdown
Members of the crypto community are seemingly outraged over the recent charges laid against crypto exchange Kraken in relation to its staking-as-a-service program in the United States. On Feb. 9, the United States Securities Exchange Commission (SEC) announced it had settled charges with Kraken over “failing to register the offer and sale of their crypto asset staking-as-a-service program,” which it claims is qualified as securities under its purview. Kraken agreed to settle the charges by paying $30 million in fines and to immediately cease the staking services to U.S. retail investors, though it would continue to be offered offshore. The …
Adoption / Feb. 10, 2023