Chair of the Securities and Exchange Commission (SEC), Gary Gensler, has been advocating against the crypto-asset industry, which has led to political backlash, with United States Representative Warren Davidson taking action.
Davidson is introducing legislation to remove Gensler as SEC boss to “correct a long series of abuses.”
SEC’s Proposed Redefinition of “Exchange”
The SEC plans to “modernize” the definition of “exchange” under its rules, which could potentially include crypto market participants in decentralized finance (DeFi).
Gensler says the rule amendments could be beneficial to both investors and the markets by bringing certain brokers under additional regulatory scrutiny.
The focus is on “modernizing” the idea of an “exchange,” which would be more closely referred to as a system that “brings together buyers and sellers of securities that offer the use of non-firm trading interest and provide another type of non-discretionary method.”
The proposed amendments would require these systems to comply with Alternative Trading System (ATS) regulations and register as national securities exchanges or broker-dealers. The SEC also stated that its current rules already cover DeFi.
Opposition and DeFi Crackdown
Gensler’s proposal and the subsequent announcement targeting DeFi have received criticism from many crypto advocates who have raised concerns about the agency’s overreach. Coinbase’s legal chief, Paul Grewal, stated his intention to have Gensler removed from his role.
Nonprofit blockchain advocacy group Coin Center also criticized the SEC’s approach as “unconstitutional.” Additionally, Commissioner Hester Peirce filed a dissent against Gensler’s policy move.
The DeFi sector is facing relentless crackdown attempts, which industry advocates believe to be “extrajudicial” in nature. Last month, Sushi DAO and Head Chef Jared Grey were served with a subpoena by the SEC. Recently, the US Treasury issued a report on DeFi’s illicit finance risk assessment.