Reports suggest SEC commissioner Hester Peirce says DeFi and Ethereum 2.0 has become a challenging sector for the SEC. Hester explains that DeFi raises a lot of legal issues that are still ongoing without a possible resolution at hand.
Peirce mentioned that DeFi project regulations might not be under the SEC’s purview, but most of the projects are on the verge of falling under securities laws. Backing up the crypto mom, the MD of Santander Bank & Enterprise Ethereum Alliance chair, John Whelan, made some interesting comments.
According to him, if one should view Defi from the financial perspective, it can enable autonomous programmable digital securities in years to come.
But, this could well be in the future because many DeFi offerings are only tokens without liquidity that serves as a source of fund for blockchain projects. But still, Peirce is cautioning those in the decentralized finance space to be careful.
How does DeFi challenge Sec?
DeFi operates in a way that makes intermediaries like exchanges and banks unnecessary in its transactions. It removes third-party players to facilitate faster access and completion of a financial transaction.
But according to Peirce, SEC cannot function without the intermediaries which DeFi is eliminating. The commission was built around the existence of these intermediaries. So, removing them makes their job very complicated.
She pointed out that apart from the effect on SEC, this nonexistence of these intermediaries also contributes to the hacks & fraudulent activities in DeFi.
Moreover, if businesses and institutions must leverage DeFi applications, the intermediaries must be present. However, she mentioned that regulatory barriers contribute to the lack of innovative breakthroughs in the financial industry.
Peirce reaction to the launch of Ethereum 2.0 and DeFi activities
Even though the crypto mom laments about the lack of intermediaries in DeFi activities, she is very enthusiastic about the Ethereum upgrade. Peirce mentioned that her 2019 “Safe Harbor” framework for all blockchain projects and this upgrade would further develop it.
According to Peirce, the framework is a way to allow a three years’ free period for network developers to build their projects without SEC’s intervention. All they had to do will be to meet the simple reporting standard, which will be set for them.
The SEC commissioner also pointed out that he’s working on the second version of the framework. H mentioned that the Ethereum upgrade contributed to slowing it down and indicates that it will succeed. According to Whelan, the launch of eTh2 also posed a new challenge for SEC because the proof of stake has presented a lot of legal questions for the commission.
Peirce supports SEC guidelines for DeFi
According to Peirce, the SEC should guide Defi, given the speed at which it dominates the crypto market. She also pointed out that there should be a relief for investment advisers and custody broker-dealers.
In 2019, SEC and FIRA claimed that crypto custody service might be overhyped. Hester Peirce indicated that the SEC might support an exchange-traded product that may be based on Ether.