Cryptos DeFi projects are not immune from regulation, SEC Gensler says

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WASHINGTON A new generation of digital asset exchanges is potentially the holy grail for cryptocurrencies: online places for people to trade and lend that allegedly involve no middleman setting the rules or taking fees.

But these peer-to-peer networks, so far completely unregulated in the United States, may not be immune from surveillance, said Gary Gensler, chairman of the Securities and Exchange Commission. Some decentralized finance projects, known as DeFi, exhibit characteristics that make them resemble the types of entities overseen by the SEC, Gensler said in an interview on Wednesday.

DeFi developers are writing software that automates transactions and say they then walk away from the project, allowing it to operate without a central entity in charge. They argue that such decentralization defeats the need for oversight by the SEC, which has said some cryptocurrencies, such as bitcoin and ether, are decentralized enough to avoid regulation.

But Mr Gensler, who took over in April, said projects that reward participants with valuable digital tokens or similar incentives could cross a line of business that should be regulated, no matter how badly they get. say decentralized.

There is still a core of people who not only write software, like open source software, but often have governance and fees, Gensler said. There’s some incentive structure for these promoters and sponsors in the middle of this.

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