September 5, 2021

SEC turns its attention to DeFi projects

SEC turns its attention to DeFi projects

The head of the SEC intends to regulate projects from the DeFi ecosystem.
According to him, some projects may have decentralized mechanisms on one side, but highly centralized on the other.

Projects from the decentralized finance ecosystem (DeFi) are in many ways attractive because they are managed in a decentralized manner by a large number of entities, and there is no single person or group of persons who can be pressured to limit the work of the services. However, SEC head Gary Gensler has apparently decided to start regulating this area as well. 

Speaking to The Wall Street Journal, Gensler said that projects that reward their participants with valuable tokens are subject to regulation, no matter how decentralized they are.

There are people who not only develop code and open-source software, they also have management authority and receive a commission. There's a scheme in this system to reward individuals who advance such projects, he said.

According to Gensler, the term "DeFi" doesn't always reflect reality. Some projects may have decentralized mechanisms on one side but highly centralized mechanisms on the other. For example, some platforms are peer-to-peer lending services that are regulated by the SEC.

This is not the first time Gensler has called for DeFi to be regulated. He previously said that the SEC needs more authority to regulate the crypto industry, including decentralized platforms.

Jack Evans

About the author

I became a crypto asset owner in 2014, when the industry was in its infancy. Before that, I was working in the classic US and European stock markets. Since then, I have gained extensive experience in both cryptocurrency investing and day trading. I am happy to share with readers my experience with crypto exchanges, DeFi and NFT instruments. 

View All Posts By Jack Evans