Head of the US Securities and exchange commission, Gary Gensler, has argued that decentralized finance (DeFi) projects can be classified as securities that the SEC should regulate. He even argued that the name DeFi is inappropriate.
Various Claims By Gensler About The Defi Industry
Gensler made his assertions known while fielding questions from journalists of the wall street journal recently. He further opined that most areas of DeFi platforms are centralized while only a few are decentralized.
Gensler also claimed that the DeFi space has “sponsors” and “promoters” who receive compensation from the platform in various other ways. He said one of the ways this set of people are rewarded is the right to governance activities even though they aren’t involved in writing the software.
Gensler Accuses DeFi Platforms
Gensler is only reiterating what he has done previously. He has always advocated for the SEC to have a greater oversight function on the DeFi industry. He believed that some DeFi platforms are running unregistered operations.
He had previously stated that “more guard rails for the crypto space would be beneficial to regulators and investors provided the legislature can update the rules regarding the industry.” He shared his recent opinion when addressing an aspen Security meeting a couple of weeks ago.
The SEC chief opined that there is an uncountable number of cryptocurrencies being sold as Securities but not registered. He further said that those platforms are in gross violation of Securities, commodities, and banking regulations.
Remarkably, Gensler isn’t solely focused on having increased oversight on the DeFi space. He has also been advocating for the SEC to have more oversight functions on the entire crypto space. He and senator Warren opined that giving the SEC this right is for the investors’ good in the digital asset space.
While on a CNBC show late last month, Gensler reiterated that “all coins, including bitcoin, are speculative assets and as a Security commission, they form part of our duty to protect the industry, especially the investors. The rising cases of fraud in the industry even make our call more important.”
Defi’s Rough Ride
Gensler’s remarks come at a time the DeFi industry is at one of its lowest ebbs. Ten days ago, a hacker moved digital assets worth about $612m from the Poly network, but he has since returned the majority of it. The poly network even offered him a bug bounty and a job. Records show that the hacker’s heist was the biggest in DeFi’s history.
Before the Poly network hack incident, CipherTrace, a blockchain forensics firm, published a survey revealing that attacks on DeFi platforms had increased almost 280% since the beginning of this year.
Thus, when the Poly network incident happened, some analysts quickly pointed out that some new investors might be unwilling to invest in the DeFi space. Some would even be tempted not to have anything to do with the DeFi space again, including purchasing DeFi-related products or services. They would rather prefer to invest in Non-fungible tokens (NFTs).
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