- Crypto lawyer Jake Chervinsky has accused the SEC of sowing “massive confusion & uncertainty”
- Chevinsky said the SEC’s rulemaking on the definitions of DeFi actors was “far from…healthy”
- The SEC recently proposed two new rules to expand the definitions of ‘dealers’
The Securities and Exchange Commission (SEC) has been accused of sowing “massive confusion & uncertainty” over its rulemaking process. Cryptocurrency lawyer Jake Chervinksy chided the agency yesterday over the proposal of two rules that governed the DeFi sector but never mentioned the term once in a combined 800 pages, despite alluding precisely to the role of various agents within a DeFi ecosystem. Chervinsky’s critique of the SEC’s rulemaking process culminated in a claim that what it is engaging in is “far from a healthy rulemaking process.”
The SEC just proposed a rule that would expand the definition of regulated “dealers” to include people who “employ passive market making strategies” that have “the effect of providing liquidity” to others.
It’s 200 pages but doesn’t say “DeFi” even once. https://t.co/nB9TVQrZ7R
— Jake Chervinsky (@jchervinsky) March 28, 2022
SEC Regulating DeFi Without Mentioning DeFi
Chervinksy was referring to two proposals put forward by the SEC in recent days, both of which tackle the DeFi sector without referring directly to it. As Chervinsky points out, yesterday’s proposal, Further Definition of “As a Part of a Regular Business” in the Definition of Dealer and Government Securities Dealer, “sought to expand the definition of regulated “dealers” to include people who “employ passive market making strategies” that have “the effect of providing liquidity” to others.”
These terms clearly related to being a liquidity provider on a decentralized exchange, yet this is not once directly referred to, while the longer proposal, Amendments Regarding the Definition of “Exchange” and Alternative Trading Systems, seeks to expand the definition of regulated “alternative trading systems” to include operators of “communication protocol systems.”
Government Wants Its Cut of DeFi Growth
The reason why the SEC is looking to expand these definitions is clear – to catch as many beneficiaries of the DeFi space as it can and allow the government to make as much money as possible from the enterprise. This is of course the broad aim, but Chervinsky neatly sums up the problems with the way in which it is going about it:
Unfortunately, the SEC continues to introduce massive confusion & uncertainty into the very same markets it seeks to regulate.
In a healthy rulemaking process, we wouldn’t have to guess at the SEC’s intent or its underlying goals.
This is far from a healthy rulemaking process.
— Jake Chervinsky (@jchervinsky) March 28, 2022
