US SEC is Now Targeting DeFi as it Reopens 2022’s Proposed Regulations
The U.S. Securities and Exchange Commission (SEC) is set to reconsider a 2022 proposal on Friday that seeks to broaden the definition of an “exchange.” This move comes in response to concerns from the cryptocurrency industry, which is apprehensive about being inadvertently caught in the regulatory net.
Securities Exchange Rules to Decentralized Finance Projects
The U.S. Securities and Exchange Commission (SEC) appears to be setting its sights on decentralized finance (DeFi) as it reconsiders a proposal from 2022 that could classify DeFi platforms as exchanges requiring regulation. Last year, the SEC proposed broadening the definition of “exchange” to encompass a wider range of trading activities in the U.S., highlighting a “regulatory disparity” as some entities engaging in trading activity were not regulated as exchanges.
The SEC reviewed comments from the crypto industry last year, which criticized the initial proposal as an overreaching power grab that lacked sufficient clarity to be considered legitimate. In response to this criticism, the commission will vote on Friday on an updated proposal. If approved, the revised proposal would employ more explicit language to encompass DeFi within the expanded definition of regulated exchanges, and it would outline estimates of the potential costs this change could impose on the industry.
SEC Chair Gary Gensler asserts that a majority of crypto platforms currently function as unregistered securities exchanges, regardless of any modifications to the definition of an exchange. However, Gensler and the commission are prepared to “underscore the relevance of existing regulations to platforms trading crypto asset securities, including those known as ‘DeFi’ systems,” as outlined in an SEC fact sheet detailing the proposed changes.
DeFi Platforms Can’t Defy Security Laws
SEC officials, addressing reporters ahead of Friday’s meeting, revealed that the reopening and supplementary information were prompted by market participants seeking further details on the proposed amendments and their application to crypto assets and DeFi.
According to SEC officials, the agency does not intend to define DeFi explicitly within the rule. Instead, it will assess each situation based on the activity conducted, including the presence of an intermediary and the specific services provided by that intermediary.
In his prepared remarks, Gensler reaffirmed his stance that “the vast majority of crypto tokens are securities” and that existing crypto trading platforms already fulfill the requirements for securities exchanges.
Gary Gensler commented:
“These platforms match orders of multiple buyers and sellers of crypto securities using established, non-discretionary methods. That’s the definition of an exchange – and today, most crypto trading platforms meet it. That’s the case regardless of whether they call themselves centralized or decentralized. Calling yourself a DeFi platform is not an excuse to defy the securities laws.”
The SEC’s initiative to clarify its stance on DeFi could suggest that the agency is currently investigating specific projects. However, the SEC refrains from commenting on ongoing investigations, and staff members did not identify any particular project during a press call.
Coinbase CLO Criticises SEC’s Proposed Crypto Asset Securities Rule
The U.S. Securities and Exchange Commission (SEC) proposed a rule in 2022 about “best execution” in the crypto asset securities market. However, Paul Grewal, the Chief Legal Officer of Coinbase, has come forward to voice his concerns about the proposed rule.
The SEC’s Proposed Rule and Its Legal Obligations
The proposed rule, Regulation Best Execution (Reg Best Ex), aims to provide a regulatory framework for brokers to ensure they offer the best possible prices to their customers. This proposed rule has caused quite a stir in the digital currency market, as it’s the first time the SEC has applied such a rule to crypto asset securities.
As per SEC’s legal obligations, the commission needs to assess the potential costs and benefits of any new rule before it can be implemented. Additionally, they must present their findings to the public to receive comments and feedback. However, the SEC lacks the necessary information about how the crypto asset securities market operates, and this has caused some concern among market participants.
Lack of Information: A Major Hindrance?
The crypto asset securities market is still in its infancy, and there are no workable rules or paths for companies that want to list crypto securities to register. In such a scenario, the SEC’s lack of knowledge about the market and its operations comes as no surprise. Paul Grewal highlights that the SEC must gather information and conduct analysis to develop a workable framework for crypto asset securities markets.
Related: Here’s Why The SEC is fighting a losing battle against Coinbase
“When the SEC is going to impose a new rule, it has a legal obligation to evaluate how that rule is going to affect the markets in its scope” – Paul Grewal
The Backbone of Good Rulemaking – Information Gathering and Analysis
Paul Grewal emphasized that the SEC cannot just apply existing rules to crypto asset securities and call it a day. Instead, they need to do the same amount of work they do for all other securities markets, starting with the basic facts about how the market does or would operate. Information gathering and analysis are the backbones of good rulemaking.
“To be clear, we’re glad the SEC is starting to think about how its rules apply to the subset of crypto that can be considered crypto securities. We’ve submitted several pieces of content, including a petition for rulemaking, to help them along.”
Coinbase’s Stance on SEC’s Proposed Rule
As the only U.S. public company operating a digital asset trading platform, Coinbase stands ready to help the SEC. However, they firmly believe that the SEC needs to do more than just copy and paste. Coinbase has already submitted several pieces of content, including a petition for rulemaking, to help the SEC develop a workable framework for crypto asset securities.
Paul Grewal’s concerns about the SEC’s proposed rule on best execution for crypto asset securities are well-founded. As the market continues to evolve, it’s vital that regulators stay up-to-date with the latest trends and developments to ensure a fair and transparent market for all.
Also Read : Ripple CEO says SEC Chair Gensler Behaves Like an ‘Autocrat’
Portugal Proposed Tax On Crypto Gains From Next Year
The post Portugal Proposed Tax On Crypto Gains From Next Year appeared first on Coinpedia Fintech News
Portugal, considered a cryptocurrency tax haven not long ago, will start taxing crypto profits from crypto held for less than a year.
The 2023 State Budget document, which was issued on October 10, included a brief section on cryptocurrency taxes, which had previously gone unnoticed by Portuguese tax officials since digital assets were not recognised as legal tender.
According to the section, the Portuguese government plans to build a “wide and suitable” tax framework for cryptocurrencies in terms of taxes and categorization. The 444 paper-long document suggests a proposed income tax on cryptocurrency businesses such as trading, mining, and capital gains.