The US Securities and Exchange Commission (SEC) has made it clear that it intends to oversee decentralized finance (DeFi), such as decentralized lending and liquidity pools, as well as decentralized exchanges (DEX). The SEC has stated that the rules governing trading exchanges in the US also apply to decentralized finance, which could signal increased scrutiny by the regulatory agency in that area of digital assets. Previously, the SEC had focused on centralized “crypto” companies, such as bitcoin exchanges, but now they are also looking at DeFi projects that bring together multiple buyers and sellers to trade assets.
However, this move may limit DeFi services on US soil, as projects that do not register as national securities exchanges or broker-dealers in the US could be subject to civil charges. Therefore, DeFi companies may be forced to comply with SEC regulations if they wish to continue operating in the United States.
Although the SEC has announced this move to clarify its view on DeFi, some institutions, such as Coin Center, consider the SEC’s actions to be unconstitutional. The move may also mean that the agency is already investigating certain projects, but the SEC has not commented on ongoing investigations or singled out any particular projects.
The five-member commission approved the announcement along party lines, by a 3-2 vote. Republican appointees to the commission strongly opposed the announcement, reflecting a split vote. In short, the SEC has made it clear that it will oversee decentralized finance, which may lead to increased scrutiny and limitations for DeFi companies in the United States.