SEC Reopens Comments on Proposed Changes to Definition of “Exchange”

The US Securities and Exchange Commission has reopened the comment period on proposed amendments to its Securities and Exchange Law, as announced on April 14th.

SEC Seeks to Expand Definition of “Exchange”

The proposed change refers to the definition of “exchange” under Rule 3b-16 of the Exchange Act, which in turn could affect certain cryptocurrency platforms.

Specifically, the new definition could expand the definition of an exchange to require registration of services that are not generally considered exchanges, such as DeFi platforms. This possibility is recognized by the SEC in the current announcement.

However, the SEC has yet to make the proposed changes.

SEC Chairman Gary Gensler said the comment period will “help address feedback… from various market participants, particularly those in the crypto markets.” However, he stated that securities laws already apply to many cryptocurrency trading services.

The SEC first proposed the amendment in January 2022. It previously reopened the comment period between May and June 2022.

Proposed change faces backlash

The proposed change has received backlash from various parties.

SEC Commissioner Hester Peirce, known for her favorable stance towards the cryptocurrency industry, has published a letter of dissent on the SEC’s website.

Peirce wrote that the change would impede innovation, adding that the SEC previously chose not to apply regulations to emerging platforms in the 1990s for this reason. He claimed that the SEC aims to use its authority to “solve problems that don’t exist.”

Advocacy group Coin Center has reiterated his earlier criticism, arguing that the change is “unconstitutional.” Other industry members, including coin base and the Blockchain Association expressed criticism towards the change in early 2022.

The proposed change is just one of many attempts by the SEC to further regulate the cryptocurrency industry. Recently, the SEC has enforced rules against betting and winnings services and has advanced changes that could affect crypto custody.

The charge SEC Reopens Comments on Proposed Changes to Definition of “Exchange” first appeared in CryptoSlate.

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