The US Securities and Exchange Commission is at it again. What seemingly could be a small policy or directive change, could have sudden massive impacts down the road. Case in point with the SEC's latest proposed rule change.
In this latest proposed rule, the SEC is changing a rule directed at electronic dealers of US Treasury bonds, but has language that could seriously hurt the DEFI industry without even having to name it in the documents. This small tweak, thrown into the foot notes of the proposed rule change is an attempt to change the definition of what a 'dealer' is.
In a Tweet by Blockchain Association head, Jake Chervinsky:
But, hold up just a minute... isn't that exactly what most DEFI platforms provide? Well, yes, yes it is...
Automatic market making in DEFI is where someone provides trading liquidity to the market. This kind of thing needs allot of liquidity to work properly. So to do this, most platforms offer passive incentives for providing liquidity to the markets. And by doing this on a decentralized exchange, you are the owner and provider of that liquidity. You generally earn exchange fees to provide those funds to the market, thus creating a passive income providing said service.
Unlike Coinbase or Binance where they actually take custody and hold funds, which makes them regulated institutions, DEFI protocols are ran and funded by self sovereign wallets. So it wouldn't just be the platform that would be required to be a registered dealer, but also the individual liquidity providers.
The rule being proposed would essentially require anyone providing liquidity to a DEFI market as a dealer. This could be a huge blow to DEFI investors in the US. All of this, again, without even mentioning cryptocurrency or DEFI. The SEC under Gary Gensler is going to stop at nothing to do some kind of damage to the cryptocurrency industry. It's just another example that this administration under Biden is completely controlled by the global banking elite and how sneaky the government is.
Even SEC Commissioner Hester Pierce, often referred to as "crypto mom", has concerns over the rule change, although she doesn't mention DeFi either. She asks whether the expanded definition could cause liquidity to dry up. In a quote from Hester Pierce,
"A more varied set of liquidity providers also benefits market resilience; when one type of liquidity provider is unwilling to step in, another may be able to fill the gap," she writes. "A market in which all of the liquidity provision is concentrated in a handful of large dealers regulated on the traditional model—which the proposal seems to favor—may impair market liquidity without increasing market resilience."
Lucky for us, we have a massive community that has learned their nasty tricks and have started reading between the lines and more importantly, the foot notes. It is becoming increasingly more important for citizens to learn and understand how policy is created and written and get involved. Stand up and push back!
Adam Vinsant, aka @thelogicaldude, is a tech and cryptocurrency enthusiast with years of experience as a designer, website developer, and technical educator. His crypto journey saw him leave the comfort of a long career with Apple to start his own blockchain based businesses. The Logical Dude is the creator of Coin Logic, Blocktunes, Hivelist, and Hivehustlers.
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Posted from my blog with Exxp : https://coin-logic.com/sneaky-sec-is-at-it-again-read-the-fine-print/