The renowned blockchain technology firm, Consensys, has recently dispatched a letter of concern to the US Securities and Exchange Commission (SEC), calling for a withdrawal of the proposed revision of the definition that might categorize DeFi protocols as a part of securities exchanges. The company, based in the US, firmly opposes this draft, citing apprehensions about regulatory overreach and the violation of key constitutional amendments of the United States.
SEC’s Proposed Rule Adjustment Faces Opposition from Consensys
In a recent submission to the SEC’s crypto task force, led by Commissioner Hester Pierce, Senior Counsel at Consensys, William C. Hughes, emphasizes several rationales urging the commission to reconsider the proposed changes in the definition of “exchange” as per the US securities law.
To start with, Hughes explains how the proposed changes to the rule exceed the intentions of the US Congress when defining “exchange” under the Securities Exchange Act of 1934 as a marketplace for buyers and sellers of securities. Contrarily, the proposed change aims to bring in platforms including DeFi protocols, whose tools are passively employed by traders to negotiate and finalize trade agreements.
Violation of APA and Encroachment of First Amendment
Further, Hughes insists that the proposed changes infringe upon the Administrative Procedure Act (APA). He asserts that the SEC overlooked several key points from the public comment of 2022. These comments insisted that decentralized protocols, if categorized as an exchange, are unlikely to fulfill the Commission’s operational requirements. This suggests a preordained intention of excluding these projects from the US.
Hughes also adds that the proposed changes don’t offer any tangible benefit apart from extending the SEC’s regulatory authority. He believes that the amendments have not accounted for the comprehensive cost-benefit analysis affecting a wide array of blockchain projects due to the change of definition.
Furthermore, Consensys’ Senior Counsel also claims that the proposed amendments are in discordance with the First Amendment as they target all “communication protocols” between parties interested in trading, devoid of affirmative verbal action. Hughes argues that the proposed amendment fails to clarify certain terms, thereby violating the due process in accordance with the Fifth Amendment.
Consensys, therefore, implores the SEC’s crypto task force to consider these points and act upon the immediate withdrawal of these changes from the regulatory agenda.
Snapshot of the Current Crypto Market
At the time of writing, the total crypto market is worth $3.11 trillion, reflecting a 1.70% drop over the past day.
FAQs
What is Consensys’ stance on SEC’s proposed rule change?
Consensys has issued a letter to the SEC urging for a withdrawal of the proposed changes to the definition of “exchange” under the US securities law, citing concerns over regulatory overreach and violation of key US constitutional amendments.
Why does Consensys believe the proposed changes infringe upon the Administrative Procedure Act (APA)?
Consensys’ Senior Counsel, William C. Hughes, asserts that the SEC overlooked key points from the public comment of 2022, stating that if decentralized protocols are categorized as an exchange, they would be unlikely to fulfill the Commission’s operational requirements.
Why does Consensys believe the proposed changes violate the First Amendment?
Consensys suggests that the amendments target all “communication protocols” between parties interested in trading, devoid of affirmative verbal action, which they believe is in discordance with the First Amendment.
What is the estimated value of the crypto market at this time?
The crypto market is currently valued at around $3.11 trillion, reflecting a 1.70% drop in the last day.
