SEC’s Proposal Changes The Definition Of “Dealer”• March 30, 2022 2:23 pm • Comments
The SEC has recently created a new proposal that would change the definition of “dealer” which would have massive implications when it comes to evaluating securities dealers in the eyes of the law.
Specifically, this would impact the growing decentralized finance (DeFi) sector since the new definition would allow the SEC to include individuals or businesses who deal with technology that facilitates trades in the financial market to be considered a “dealer”.
Because of this new definition, it would naturally also include all digital assets which provides a convenient excuse for the SEC to declare digital assets as securities.
As a result, investors are seeing this move as a back door maneuver that the committee is using to extend its domain of authority which will likely stifle innovation for the DeFi industry.
it's an all-out shadow attack on decentralized finance https://t.co/MSfwDYftgU
— _gabrielShapir0 (@lex_node) March 28, 2022
The SEC proposal to change the definition of the word “dealer” targets electronic traders of United States Treasuries. The SEC has struggled to manage this issue dating back nearly an entire decade.
The suggested rule would prove applicable to digital assets that are considered securities.
Attorneys that represent cryptocurrency businesses have taken to the web including social media to refer to the SEC’s proposal detailed above as a clandestine attack against the burgeoning DeFi movement.
Delphi Digital’s general counsel, Gabriel Shapiro, recently stated that if the suggested proposal is accepted and the suggested language alteration is enforced, it would eliminate DeFi technology from existence.
Shapiro’s opinions and predictions are important as his employer is one of the world’s leading cryptocurrency research firms.
Essentially, all DeFi players would suddenly become under the domain of the SEC which is surprising given that there has not been much media attention regarding this new proposal.
All crypto lawyers, however, are concerned about this recent action and are keeping a close eye on any new developments regarding this issue.
The proposal comes during a troubling time when many industry and government players are starting to challenge the SEC’s authority which include members of Congress as well as large scale digital asset managers like Grayscale.
Attorneys are expected to contest against this new proposal as this may be another case where the SEC is overstepping the bounds of its authority.
🚨 BREAKING: New proposal by #SEC aims to redefine what it means to be a securities dealer, a move industry experts say could cripple #DeFi industry. A “dealer” will include people & businesses that use automated & algo trading to execute trades & provide liquidity in the market. pic.twitter.com/EuqBPF7EUR
— WallStreetPro (@wallstreetpro) March 28, 2022
Besides the actual impact on the functioning of decentralized finance’s (DeFI) cryptocurrency and derivatives exchanges, Jake Chervinsky, head of policy for the Blockchain Association, accused the SEC of trying to sneak the rule through as part of larger, non-cryptocurrency-related measure.
The SEC’s proposal “would expand the definition of regulated ‘dealers’ to include people who ‘employ passive market making strategies’ that have ‘the effect of providing liquidity’ to others,” Chervinsky tweeted yesterday. “It’s 200 pages but doesn’t say ‘DeFi’ even once.”
The SEC did not respond to a request for comment.
“Unfortunately, the SEC continues to introduce massive confusion & uncertainty into the very same markets it seeks to regulate,” Chervinsky said. “In a healthy rulemaking process, we wouldn’t have to guess at the SEC’s intent or its underlying goals.”
This rule proposal is, he added “far from a healthy rulemaking process.”
Investors are hoping that the CFTC will eventually take a more prominent role in crypto regulation within the country to quickly reverse a lot of the strict regulations that are being put out now.
A new proposal by the U.S. Securities and Exchange Commission (SEC) aims to redefine what it means to be a securities dealer – a move industry experts say could cripple the decentralized finance (DeFi) industry. https://t.co/MGpJqaneCE
— Michael (@val5linx) March 29, 2022
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