US financial regulators are poised to further tighten the screws on the digital asset sector, with Securities and Exchange Commission Chairman Gary Gensler leading an ongoing campaign against illegal cryptocurrency activity.
The SEC voted Friday to provide further guidance on how a proposed update to securities trading rules would affect cryptocurrency markets and decentralized finance (DeFi) applications in particular.
Gensler said the supplemental statement sought reactions from cryptocurrency market participants on the proposed regulation, but also noted that many cryptocurrency companies are already violating securities laws regardless of whether the revised rule is adopted or not.
"These platforms appear to have the ability to comply with our laws," Gensler said. - They are not.
"Calling yourself a crypto platform is no excuse to ignore security laws," he said. "Calling yourself a DeFi platform is no excuse for violating security laws."
The comments come amid a wave of lawsuits against cryptocurrency firms, with the SEC increasing cases against the digital asset sector by 50% last year, according to litigation consultancy Cornerstone Research.
Coinbase Global Inc., a publicly traded cryptocurrency exchange, said last month that it had received a Wells notice from the SEC, a formal notification that the agency is considering enforcement action against it for violating securities laws.
In February, the SEC fined cryptocurrency Kraken for failing to record the offer and sale of certain cryptocurrency-related investment contracts. Kraken paid a fine of 30 million dollars without admitting his guilt.
A new business rule proposed last January is intended to update the definition of "exchange" under SEC rules to provide greater oversight of common electronic reporting platforms in fixed income markets, which the SEC says operate like stock exchanges. .
The cryptocurrency community immediately sounded the alarm about how the rule could affect DeFi platforms or the protocols used to trade cryptocurrencies such as Bitcoin and Ether.
"The proposal is essentially for something like Bloomberg Terminal, where buyers and sellers can find each other using a chat function," Jerry Brito, executive director of the cryptocurrency think tank, wrote at the time. "However, the language of the proposed new rule is written so broadly that it is hard to see how it would not cover decentralized exchanges."
SEC officials told reporters during a briefing Thursday that the agency received numerous comment letters asking how the proposed rule would apply to digital assets, so the committee voted Friday to add more material to the rulemaking to respond to such comments.
Ignacio Sandoval, a former SEC regulator and partner at the law firm Morgan Lewis, told MarketWatch that while the industry is right to be concerned about how potential new rules could affect the agency, the agency already has the power to submit request.
"The SEC is trying to establish clearly that [most cryptocurrencies] are securities and subject to existing rules," he said, adding that the agency is laying the groundwork through enforcement actions to be able to say to digital asset companies: we made our views very clearly."