In a recent statement, Hester Peirce, commissioner of the United States Securities and Exchange Commission (SEC), has again taken a stance against the agency. The SEC commissioner has criticized the proposal and the current leadership of the agency.
Sources reveal that Peirce said that the agency has been aggressively expanding its regulatory authority to tackle problems that “do not exist.” She called out the regulator for inhibiting innovation and said that:
Rather than embracing the promise of new technology as we have done in the past, here we propose to embrace stagnation, force centralization, urge expatriation, and welcome extinction of new technology.
Recently, the SEC decided to reopen the comment period for amendments to “Exchange Act Rule 3b-16” regarding the definition of “exchange.” The regulator’s decision to invite comments comes following the speculations raised by the executives of several crypto firms.
Furthermore, the commissioner believes the regulator used the term without considering the effect it could have on hundreds of systems and the potential market disruption. She adds that the proposal imposes impractical standards for decentralized activity and those involved.
While the Exchange Act defines an exchange as “an organization, association, or group of persons,” the definition struggles to apply to decentralized finance, because here the marketplace is software, and participants may not even know each other.
The SEC commissioner noted that the regulator failed to consider if compliance is even possible before drafting these rules. She commented that this suggests an attempt to regulate decentralized finance into nonexistence. She adds:
Rather than [the SEC] responding to commenters’ serious concerns about the breadth, ambiguity, unworkability, and potential disruption of the proposal, the reopener, with few exceptions, doubles down on the defects identified by commenters.
Notably, if the amendment comes into play, decentralized platforms will be subject to the regulator’s control. The plan was first proposed in January last year putting forward an idea that exchanges now include platforms that use “communication protocols.” Following the proposal’s announcement, the ambiguity of the term triggered concerns among the industry participants.
On the other hand, Gary Gensler, chairman of the SEC, believes the existing definition of exchange already covers many crypto platforms, including those claiming to be decentralized.
In her statement, Peirce highlighted that the regulator failed to define a “Communication Protocol System” and instead asked commenters if they wanted more examples and what type of examples they wanted.
A communication protocol is a system of rules that allows two or more entities of a communications system to transmit information via any kind of variation of a physical quantity. The protocol defines the rules, syntax, semantics, and synchronization of communication and possible error recovery methods.
Notably, dignified personalities and at large the crypto industry have applauded the SEC commissioner for calling out the regulator for their antagonistic approach. The SEC has been under constant scrutiny from the industry as well as some lawmakers. The regulator has consistently cracked down on crypto entities and is carrying an enforcement-driven regulatory approach.