24/7 Cryptocurrency News

SEC Enforces New Rules Aimed at Safeguarding Crypto Investors

SEC expands oversight to crypto, targeting DeFi and liquidity providers for stronger investor protection under new rules.
SEC Enforces New Rules Aimed at Safeguarding Crypto Investors

Highlights

  • SEC's new regulations extend oversight to crypto and DeFi, demanding registration for liquidity providers.
  • Industry uproar over SEC's crypto regulations reveals lack of clarity and guidance.
  • Commissioner Peirce questions applying traditional rules to crypto protocols.

The Securities and Exchange Commission (SEC) has implemented new regulations that widen its reach to include market participants who engage in cryptocurrency transactions considered securities, including those under the decentralized finance sector. 

This action is meant to strengthen investor protection by making these entities adhere with federal securities laws. The ruling, passed by a 3-2 vote, has brought about considerable changes in the way liquidity providers within the crypto space conduct their businesses, requiring them to register as dealers or government securities dealers under some conditions.

Advertisement

New Regulatory Framework

The SEC’s 247-page rule, which was finalized on Tuesday, defines the circumstances under which individuals and entities involved in crypto asset transactions should follow current securities rules. 

In particular, individuals who conduct activities that typically include a pattern of buying and selling crypto asset securities to provide liquidity into the market are now required to register. This applies unless their assets fall below the $50 million threshold, which has been set as an exemption cap.

Advertisement

Impact on Decentralized Finance

The implications of this rule extend deeply into the DeFi ecosystem, affecting automated market makers (AMMs) and other DeFi protocols. AMMs, which facilitate trading through liquidity pools locked in smart contracts, are now under scrutiny. 

The SEC’s stance categorizes these mechanisms as partaking in dealer activities if they meet the defined regularity in trading, thus necessitating registration. This development has sparked concern within the industry, with many arguing that these platforms’ decentralized and autonomous nature makes compliance challenging.

Concurrently, The crypto industry has sharply criticized the SEC’s rule, highlighting its practical hassles and perceived overreach in imposing traditional securities laws on DeFi space. Critiques claim that the absence of a unified controlling authority in DeFi protocols makes SEC’s requirements inconvenient and harmful to innovation. 

These high-profile responses from organizations such as the DeFi Education Fund and Chamber of Digital Commerce showcase industry frustration with what many see in this space as a lack of clarity, engagement, and regulatory guidance from the SEC.

Dissenting Voices Within the SEC

The rule was adopted with opposition. In particular, Commissioner Hester Peirce has been outspoken about her concerns, and she wonders whether it is possible to apply such regulations to software protocols like AMM. 

The debate within the Commission illustrates broader uncertainties regarding appropriate ways of integrating the fast-developing crypto industry into an existing regulatory framework without stifling innovation or jeopardizing investor protection.

Read Also: Crypto Legislation: XRP Lawyer Vindicates 3 Coins Amid Crackdown Calls

Advertisement

Share
Kelvin Munene Murithi

Kelvin Munene is a crypto and finance journalist with over 5 years of experience, offering in-depth market analysis and expert commentary . With a Bachelor's degree in Journalism and Actuarial Science from Mount Kenya University, Kelvin is known for his meticulous research and strong writing skills, particularly in cryptocurrency, blockchain, and financial markets. His work has been featured across top industry publications such as Coingape, Cryptobasic, MetaNews, Cryptotimes, Coinedition, TheCoinrepublic, Cryptotale, and Analytics Insight among others, where he consistently provides timely updates and insightful content. Kelvin’s focus lies in uncovering emerging trends in the crypto space, delivering factual and data-driven analyses that help readers make informed decisions. His expertise extends across market cycles, technological innovations, and regulatory shifts that shape the crypto landscape. Beyond his professional achievements, Kelvin has a passion for chess, traveling, and exploring new adventures.

Why trust CoinGape: CoinGape has covered the cryptocurrency industry since 2017, aiming to provide informative insights to our readers. Our journalists and analysts bring years of experience in market analysis and blockchain technology to ensure factual accuracy and balanced reporting. By following our Editorial Policy, our writers verify every source, fact-check each story, rely on reputable sources, and attribute quotes and media correctly. We also follow a rigorous Review Methodology when evaluating exchanges and tools. From emerging blockchain projects and coin launches to industry events and technical developments, we cover all facets of the digital asset space with unwavering commitment to timely, relevant information.
Investment disclaimer: The content reflects the author’s personal views and current market conditions. Please conduct your own research before investing in cryptocurrencies, as neither the author nor the publication is responsible for any financial losses.
Ad Disclosure: This site may feature sponsored content and affiliate links. All advertisements are clearly labeled, and ad partners have no influence over our editorial content.

Recent Posts

  • 24/7 Cryptocurrency News

SEC Issues Guidance Enabling Ripple, Coinbase, BitGo to Qualify as Custodians

The U.S. Securities and Exchange Commission (SEC) has issued a new guidance. This allows investment…

October 1, 2025
  • 24/7 Cryptocurrency News

Fed’s Goolsbee Cites Inflation Worries in Case Against Further Rate Cuts

Federal Reserve Bank of Chicago President Austan Goolsbee has warned that inflation risks could outweigh…

October 1, 2025
  • 24/7 Cryptocurrency News

David Schwartz To Step Down as Ripple CTO, Delivers Heartfelt Message to XRP Community

David Schwartz has announced plans to step down from his role as Ripple's Chief Technology…

October 1, 2025
  • Bitcoin News

Michael Saylor Reveals Strategy’s Endgame To Accumulate $1 Trillion Bitcoin For Its Treasury

According to Strategy executive chairman, Michael Saylor, the company has an ambitious vision for its…

October 1, 2025
  • Bitcoin News

CZ Hints at ‘Uptober’ Bitcoin Rally Following Green September

Binance founder Changpeng "CZ" Zhao has hinted at another potential 'Uptober' rally as he alluded…

September 30, 2025
  • Bitcoin News

BlackRock Now Holds 3.8% of Bitcoin Supply; Bloomberg Analyst Explains Why It’s ‘Extraordinary’

The world's largest asset manager, BlackRock, now holds 3.8% of the total Bitcoin supply through…

September 30, 2025