Breaking: SEC Chief Says Crypto Defi Projects are not Immune to Regulations, Here’s Why

Gary Gensler, the chief of the US Securities and Exchange Commission (SEC) in an interview on Wednesday said some Defi projects including peer-to-peer exchanges have features that might come under SEC’s overwatch. Gensler highlighted that these projects offer rewards in the form of valuable tokens to participants and some of these incentives could cross a line that needs to be regulated, no matter how decentralized the projects are

“There’s still a core group of folks that are not only writing the software, like the open-source software, but they often have governance and fees,” Mr. Gensler said. “There’s some incentive structure for those promoters and sponsors in the middle of this.”

Defi project operators claim that most of the work on the network is done by pre-programmed software with no human intervention and thus it is decentralized enough to avoid falling under the regulatory premise of SEC. However, Gensler’s recent comments could trigger another debate on decentralization and regulations.

Are US Regulators Looking for a Crypto Regulatory Overhaul?

The demand for regulations around the crypto market is at an all-time high with several policymakers and regulatory bodies calling for strict measures to ensure investor protection. Gensler recently responded to Sen. Elizabeth Warren’s letter demanding higher authority for the SEC over the crypto market.

The introduction of Crypto Tax measures in the Infrastructure Bill is also a clear sign that the Biden administration wants to tax the crypto market heavily. The crypto proposals in the Infrastructure Bill met with strong opposition that led to two sets of amendments. Finally, the last-minute amendment that called for proof-of-stake validators and vendors to report crypto transactions was passed by the senate.

Looking at Gensler’s comment about regulations and the new government policies around the crypto market, it seems the regulators can come up with guidelines any time soon.