Cryptocurrency company Paradigm has criticized the US Securities and Exchange Commission's (SEC) efforts to redefine the term "exchange" and bring decentralized exchanges (DEX) under its regulatory jurisdiction. In a 14-page letter to the Securities and Exchange Commission, Paradigm argued that treating DEX as a traditional exchange is illegal and inconsistent.
The difference between DEX and exchange
The sample points to key differences between DEXs and exchanges, which are proposed to be informal DEXs that operate differently from traditional exchanges because they do not act as intermediaries for transactions and lack a central authority to regulate the exchange. Instead, DEXs use automated market-making mechanisms and self-executing codes to facilitate cryptocurrency trading.
Paradigm's letter raised concerns about the SEC's regulatory process. It previously cited procedural flaws in the March 2022 notification, including a short moratorium period and a lack of cost-benefit analysis. Although the SEC renewed the ban in May 2022 and April 2023, Model argued that the effort is not systemic reform. Error. The main one. The agency argued that the SEC's proposal violates the fair opportunity for public comment provided by the Administrative Procedure Act.
Cryptocurrency industry and the impact of regulatory measures
The proposal to redefine the SEC comes amid recent lawsuits the agency has filed against major cryptocurrency exchanges, Binance and Coinbase, alleging security breaches. Paradigm suggested that the SEC's regulatory action against Coinbase and the increased investigation of Binance could ultimately benefit Coinbase by reducing competition in the long run. However, the company has criticized the SEC's enforcement approach, which it believes has had a negative impact on cryptocurrency innovators in the United States.
Although the SEC has designated many digital assets as securities over the years, Congress has not enacted formal legislation to classify the cryptocurrency market as such. The latest enforcement action against crypto companies in the wake of the FTX crash indicates heightened scrutiny from federal regulators.