The Securities and Exchange Commission’s (SEC) proposed redefinition of the term “exchange”, which prompted Washington DC-based advocacy group Coin Center to show concern over its newly proposed definition.
According to the SEC, the term “exchange” is redefined within the Securities Exchange Act to “include systems that offer the use of non-firm trading interest and communications protocols to bring together buyers and sellers of securities.”
In a comment letter to the agency today, Coin Center criticized the SEC’s latest move saying the SEC proposal has serious changes hidden within its complex language. It further regarded the redefinition as “unconstitutional overreach”.
Coin Center argues that the new proposed rule “would create an inappropriately broad standard for registration that would impose an unconstitutional prior restraint on the protected speech activities of countless software developers and technologists.”
Entities that fall under that definition would be required to register with the SEC. Coin Center said that bringing together orders, which are things, is very different to bringing together people. Further, it emphasized that the latter is tantamount to coercion.
The rule change suggests that Communication Protocol Systems are also exchanges that bring programmers who merely share code for the crypto trade. If the proposal becomes an SEC rule, decentralized exchanges such as PancakeSwap (CAKE) and UniSwap (UNI) would all be required to register as exchanges.
The shift to a speech-based definition would impact many publishers, republishers, and developers who may trade code but not tokens. This is particularly the case for DEX developers.
Though, SEC states the redefinition as a measure to reduce disparities among like markets, the nonprofit thinks of it as an attempt to abridge freedom of speech in contravention of the First Amendment.
Coin Center also cited Supreme Court precedent that it believed could compel the SEC to withdraw its proposal. The SEC will be accepting comments from U.S.citizens regarding the rule proposal until April 18.
Recently, SEC’s Gary Gensler remarked that cryptocurrencies are like securities and hence, must play by the same market integrity rule book as other securities under SEC laws.
