SEC Introduces Trojan Horse Crypto RegulationFebruary 4, 2022 3:13 pm
The overall crypto market has recently seen an impressive bounce indicating signs that the bear market since the start of the year is losing some strength.
Last week, the SEC decided to release a new proposal to regulate “treasury markets platforms” which has raised some suspicion among the crypto community.
Many see this move as an attempt to add more regulation without attracting too much attention as the proposal does not actually mention crypto, but could still allow regulators to interfere with crypto operations.
As a result, the introduction of this paper now has the community calling this a trojan horse as it may be trying to hide the SEC’s actual goal.
"While the proposal doesn’t mention crypto, its new rules would let regulators probe into crypto platforms and even decentralized finance (DeFi) protocols." #DeFi #DeFiProtocols #crypto
— DanielSchiller (@DSchillerTX) February 4, 2022
Last week, the SEC introduced a seemingly unrelated 654-page proposal to regulate “Treasury Markets Platforms.”
Pro-crypto commissioner Peirce, however, warns that this is radical crypto regulation in disguise.
Although the proposal does not mention crypto, its new rules would allow regulators to probe crypto platforms and even decentralized finance (DeFi) protocols.
“The proposal includes very broad language, which, along with the president’s apparent interest in regulating all things crypto, suggests it could be used to regulate crypto platforms,” Peirce wrote in an e-mail. -mail, as reported by Bloomberg”.
She added: “The proposal could reach more types of trading mechanisms, potentially including DeFi protocols.
According to the SEC chairman, the changes introduced are aimed at addressing a “regulatory gap” issue due to the existence of many trading exchanges and platforms that are not currently registered with the SEC.
If this proposal is passed, all these platforms would be subject to regulation and would have better access to the treasury market.
Yet, because f the broad language used, the platforms that would be covered could far exceed the public’s expectation depending on the definition of exchange platforms.
The SEC has also gone on to mention that DeFi platforms still need to be regulated as participants still get rewards or incentives as digital tokens which is under SEC regulation.
Starting now, there will be a period of 30 days to gather comments and reactions on the bill before the committee will have a vote to make a final decision.
Crypto policy reporter Gabriel Shapiro discusses the implications of the proposal in his CryptoLaw newsletter.
Shapiro, a U.S. attorney himself, takes a deep dive into the lengthy proposal. In it, he calls the proposal a “radical paradigm shift” for the agency.
Most notably, Shapiro accuses the proposal of trying to capture crypto exchanges and DeFi platforms alike under the definition of an exchange in order to prohibit their operation. Shapiro lays out many questions regarding how this policy would be implemented.
For instance, he alleges the proposal leaves questions over how deploying automated market maker (AMM) code would work, and whether these programmers would have to register with FINRA or track all trades on a platform — both near-impossible tasks.
The SEC will hear all dissenting opinions on the proposal over the next month; Peirce and Shapiro are among the many crypto bulls calling for investors to make their voices heard, and to ask for further clarification over what seems to be a very ambiguous proposal.
The timing of the proposal is also happens to coincide with many other possible upcoming regulations during a time when the crypto market is starting to show some recovery from the recent decline.
The implications of this on the overall crypto market and price of major blockchains is currently unknown as the committee waits to vote on the proposal.
— PipPost (@pip_post) February 4, 2022
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