The DeFi Education Fund has sent a letter to the Securities and Exchange Commission requesting rulemaking regarding DeFi (Decentralized Finance).
The DeFi Education Fund is a non-profit that advocates for regulatory clarity and research on the DeFi sector. The group was established in 2021 through a governance proposal within the Uniswap ecosystem.
The letter follows a statement by the SEC Division of Markets and Trading regarding DeFi activity, where the division said that certain software user interfaces used to trade crypto do not need to register as broker-dealers. This affects sites or apps that connect to DeFi protocols or self-custody wallets, which will not need to register as a broker, effectively giving the green light for the activity to continue.
The letter, signed by numerous digital asset supporting groups including the Digital Chamber urges the Commission to build upon the statement by notice-and-comment rulemaking.
“Specifically, the Commission should consider adopting a principles-based framework that provides clear, objective criteria for when activity falls within the definition of “broker,” iterating on the criteria in the Statement. Finalizing these principles would provide the legal certainty needed to support responsible innovation while preserving the Commission’s ability to regulate the intermediaries that pose the risks that the broker-dealer regulatory regime was designed to address. Such a rulemaking would support the activities of other infrastructure providers, including validators, API and RPC providers, data and communications networks, oracles, and cloud services, all of which play important roles in blockchain innovation and performance but do not engage in brokerage or dealing activities. It would also help avoid the need for ad hoc guidance and allow developers and others to build and implement compliant systems with confidence over the long term.”
The SEC, under the leadership of Chairman Paul Atkins, has been supportive of digital asset innovation and Fintech in general. This contrasts with the prior administration, which sought to undermine digital asset development, thereby missing an opportunity to play a key role in the future of financial services. Industry participants have played an important role in crafting new rules pertaining to crypto, as the Commission has taken a hands-on, engagement-friendly approach to enabling the development of crypto.
Meanwhile, crypto market infrastructure legislation, the CLARITY Act, is stalled in the Senate amid pushback from the banking industry, which fears additional competition and a potential revenue decline if the industry does not adapt.