- ConsenSys urges the SEC to drop a rule that expands the exchange definition to include DeFi platforms.
- The company warns that new regulations could slow blockchain growth and push developers out of the US.
- ConsenSys argues that DeFi platforms do not fit the traditional exchange model and should not face the same rules.
ConsenSys has submitted a letter to the U.S. Securities and Exchange Commission requesting that the commission withdraw a proposed rule that will broaden the definition of an exchange. The company is claiming that the amendments exceed legal authority by including decentralized finance platforms under Securities regulations. The letter was sent to Commissioner Hester Peirce and the SEC’s Crypto Task Force, urging that the rule be taken off the regulatory agenda.
The rule violates the Administrative Procedure Act (APA) and it contradicts constitutional principles according to ConsenSys. The company states that DeFi platforms do not operate like traditional exchanges and should not be classified under the same regulations. The concerns align with past opposition to the proposal that includes comments submitted in 2022 and 2023.
Impact on DeFi Innovation and Blockchain Development
The proposed rule could negatively affect blockchain innovation and DeFi adoption. ConsenSys warns that regulatory uncertainty may discourage developers from building financial applications on blockchain networks. The company also states that applying exchange regulations to decentralized platforms would create compliance burdens that conflict with their structure.
DeFi platforms rely on smart contracts and peer-to-peer networks to perform transactions. ConsenSys argues that forcing them to comply with securities regulations could hinder their ability to operate in the U.S. The competitiveness of the country could reduce in financial technology and this could push blockchain development offshore.
Ongoing Legal Battles and Future Regulatory Shifts
The SEC’s litigation against ConsenSys further complicates regulatory discussions. The agency accuses the company of operating an unregistered broker through MetaMask’s staking services. The case follows similar actions against other crypto firms, though recent leadership changes in the U.S. may influence future regulatory decisions.
The lawmakers and the crypto industry continue their efforts to establish clear regulations. The SEC halted the Binance case and dropped charges against Coinbase. These changes suggest a potential shift in regulatory approach under the new leadership which could impact how DeFi platforms are considered moving forward.
