SEC’s new rules on dealers could rope in defi liquidity providers

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The SEC is adopting stricter compliance guidelines for big capital buyers in Treasury Markets, however some provisions appear to affect decentralized finance customers.

On Feb. 6, the U.S. Securities and Change Fee (SEC) adopted two guidelines mandating that market contributors partaking in substantial liquidity-providing actions register with the watchdog and be a part of a self-regulatory group, thus complying with regulatory obligations and federal monetary legal guidelines.

Initially proposed in March 2022 and geared towards bolstering Treasury market security, the foundations embrace provisions that talk to crypto asset securities. Defi buyers offering over $50 million in liquidity to automated market makers, like Uniswap, will fall underneath the SEC’s purview if this laws is enforced.

A 3-2 vote settled the SEC’s deliberation on the foundations, with Commissioner Hester Peirce and Mark Uyeda opposing the proposal. Commissioners Gary Gensler, Caroline Crenshaw, and Jaime Lizarraga supported the thought.

This rulemaking targets proprietary buying and selling funds, personal funds, and others who earn money by shopping for low and promoting excessive within the Treasury market, whereas creating further regulatory confusion in different markets, together with crypto asset securities.

Mark Uyeda, SEC commissioner

Crypto proponents such because the Blockchain Affiliation and the DeFi Training Fund pushed again on the insurance policies in feedback letter when the foundations have been first launched. Miller Whitehouse Levine, CEO of the DeFi Training Fund, argued that the expanded definition of a market seller was too ambiguous and left a number of unaddressed issues concerning defi protocols.

Commissioner Peirce questioned how an automatic market maker (AMM), basically software program, would possibly register with the SEC and what number of corporations the brand new guidelines would affect. Haoxiang Zhu, the SEC’s director for the buying and selling and markets division, stated the proposal was geared toward people leveraging decentralized software program fairly than the know-how itself. 

Zhu added that restricted data and sweeping non-compliance from defi actors made it tough to pinpoint the contributors who can be affected.

One of many causes they’re not compliant is they will’t determine what our guidelines are. They’ll’t even determine after we assume that one thing is a safety.

Hester Peirce, SEC commissioner

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