In Brief:
- SEC Gensler targets DeFi as important over crypto regulations.
- Interoperability protocol PolyNetwork suffered a $600.3 million hack
SEC chairman Gary Gensler says decentralized finance (DeFi) projects aren’t exempt from regulations.
DeFi projects have features that make them look like the type of entities the SEC oversees, Gensler said in an interview with Wall Street Journal.
The lack of a middle man to impose rules and fees prompts many to look into DeFi exchanges. At the moment these types of P2P networks currently aren’t subject to any regulations in the U.S. Gensler said they are not immune from oversight.
Gensler added that although there is no central entity in charge. DeFi developers argue that such decentralization defeats the need for oversight by the SEC.
Mr. Gensler, who took over in April, said a project that rewards participants with valuable digital tokens or similar incentives “could cross a limit into activity that should be regulated, no matter how decentralized they say they are.”
“There’s still a core group of folks that are not only writing the software, like the open-source software, but they often have governance and fees,” Mr. Gensler said. “There’s some incentive structure for those promoters and sponsors in the middle of this.”
Gensler’s comments appear on either side of the rough period for DeFi. Previously, Gensler told Warren that his agency needs more resources to tighten regulations on cryptocurrency exchanges and protect American retail investors.
