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Thursday, Sep 23, 2021

SEC's Gensler: DeFi Platforms ‘Highly Centralized’, Should Register With SEC

SEC's Gensler: DeFi Platforms ‘Highly Centralized’, Should Register With SEC

According to Gary Gensler, chairman of the U.S. Securities and Exchange Commission, DeFi is 'highly centralized' in certain aspects and urged projects working in the sector to register with the SEC.

According to Gary Gensler, chairman of the U.S. Securities and Exchange Commission, DeFi is ‘highly centralized’ in certain aspects and urged projects working in the sector to register with the SEC.

Speaking to The Wall Street Journal on August 19, Gensler suggested that the decentralized notions implied by the term DeFi were “a bit of a misnomer,”:

“These platforms facilitate something that might be decentralized in some aspects but highly centralized in other aspects.”

While DeFi projects are designed to be autonomous platforms that operate without a centralized authority, Gensler asserted that many are developed and controlled by a centralized team who are incentivized to promote their platforms. He said:

“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. There’s some incentive structure for those promoters and sponsors in the middle of this.”

Gensler expanded on his comments in an August 20 interview with Fox Business and suggested that such DeFi projects are centralized enough to fall under the scope of regulation. He urged DeFi projects to register with the SEC:

“These so-called decentralized finance platforms actually have a lot of centralization. There’s a group of entrepreneurs that are running these platforms. They should come in and to that extent work with us and get registered.”

Earlier this month, SEC commissioner Hester Peirce, aka “Crypto Mom”, voiced similar sentiments from a different angle when she warned of “shadow-centralization” within the DeFi sector.

Peirce stated that “If regulators can find a centralized part or group of people that they can grab hold of, they will grab hold of them,” as she urged for caution in how projects are built from the ground up.

“If you want to be decentralized, you really need to be decentralized, and that is going to then put you in a different category from the perspective of regulators because that’s just not something that we’ve dealt with before,” she said.

Earlier this month, Gensler had identified several crypto policy changes that are being examined by the SEC, including matters concerning DeFi, lending platforms, token offerings, stablecoins, exchange-traded funds and custody.

Source: SEC's Gensler: DeFi Platforms ‘Highly Centralized’, Should Register With SEC – Fintechs.fi

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