Gary Gensler: DeFi decentralisation does not give immunity from SEC oversight

August 25, 2021

Gary Gensler DeFi decentralisation does not give immunity from SEC oversight

DeFi projects can be regulated by supervisory authorities regardless of their degree of decentralisation. Gary Gensler, head of the US Securities and Exchange Commission (SEC), said this in an interview with The Wall Street Journal.

Gensler called the term DeFi a misnomer because the current platforms are "decentralised in some aspects but very centralised in others". In particular, he noted projects that encourage participants with digital tokens or in other similar ways.

"There is still a backbone of people who not only develop the software, as in the case of open source, but often manage and charge a commission. There is a certain incentive structure for these promoters and sponsors," said the head of the agency.

According to Gensler, certain DeFi projects have features that make them similar to the types of organisations that are regulated by the SEC. For example, some of them can be compared to peer-to-peer lending platforms.

Larry Cermak, an analyst at The Block Research, believes that if the SEC decides to prosecute the founders and developers of DeFi-projects, they will leave the US or pursue projects on an anonymous basis.

If they actually try to enforce this and go after the devs and founders, it will just push all the teams to move outside of the U.S. permanently and encourage more anon development. Not much more they can do honestly

Earlier, SEC commissioner Hester Pearce opined that full decentralisation from launch is the only hope of DeFi projects avoiding financial regulation. She explained that supervisors will try to grasp any element of centralisation they can find.

This is not the first time Gensler has talked about increased regulation of DeFi. At the beginning of August, he said that to protect investors, the agency was prepared to impose a stricter supervisory regime.

That same month, the Commission said the founders of DeFi Money Market would pay more than $12 million to settle with it. According to the SEC, the case was the first precedent for a DeFi project to be held liable. At the time, Pearce stressed that it "was decentralised in name only".

Recall that the SEC chief believes that the agency needs additional powers and resources to regulate the digital asset industry. He also singled out cryptocurrency trading, lending and DeFi as lawmakers' priorities.

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Hi there, my name is Zalman Weinberg. I'm enthusiast with over 7 years of experience in cryptocurrencies and blockchain. Professional Trader providing Blockchain solutions to Startups and Enterprises. Expert in all cryptocurrency exchange APIs (BitMEX, Bittrex, Binance, Bitfinex, Kraken, Poloniex, Gdax etc.). I have also worked with multiple Forex broker APIs.

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