Two Congress republicans, Patrick McHenry and Bill Huizenga, have jointly written a letter to SEC Chair Gary Gensler to address new amendments made in crypto exchange regulations.
In the Letter, two congress members have raised concerns over recently proposed rules and their adverse impact on the digital asset market participants as well as decentralized finance (DeFi).
They have stated that if these new amendments are left unaddressed then they “have the potential to stifle innovation and harm market participants.”
On Jan 26, 2022, SEC proposed to expand the definition of ‘exchange’, which is already defined in the Securities Exchange Act of 1934 (the “Exchange Act”).
The proposed rule demands to add “Communications Protocol Systems” as exchanges. This move can exceed the SEC’s statutory authority. The new amendment in the exchange’s definition would create significant uncertainty for market participants, those who do not fit with the new “exchange” definition.
A proposed rule demands to add “Communications Protocol Systems” as exchanges. This move can exceed the SEC’s statutory authority. The new amendment in the exchange’s definition would create significant uncertainty for market participants, those who do not fit with the new “exchange” definition.
The redefinition of the exchange has also prompted Washington DC-based advocacy group Coin Center to show concern over its newly proposed definition through a comment letter.
Owing to the rules, exchanges will have to register their business with the SEC. Furthermore, the proposed rule will declare digital assets as securities without any additional information or related cost-benefit analysis.
U.S senators slated an insufficiency of both proposals, as they failed to define the scope of the impacted market participants. Also, SEC’s justification has not covered adequate details on the cost of compliance.
As per the republicans, the rulemakings don’t give clarification on why “market participants”, which facilitate digital asset transactions, need to register their businesses with the SEC.
The Republicans also stated that the SEC should give adequate time for the public and stakeholders to review and analyze the proposals, which is crucial for the effective rulemaking process.
Congress senators asked the SEC to re-propose the rule with satisfactory economic analysis, justification, and with more clarity.
