SEC Chief Says Most DeFi Project Aren’t Decentralized
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SEC Chief Says Most DeFi Project Aren’t Decentralized

9 months ago

Securities and Exchange Commission Chief Gary Gensler said many so-called decentralized crypto projects must be regulated.

SEC Chief Says Most DeFi Project Aren’t Decentralized

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Securities and Exchange Commissioner Chairman Gary Gensler has put the decentralized finance community on notice that most projects must register with his agency.

Speaking to the Wall Street Journal on Aug. 19, Gensler said DeFi “projects that reward participants with valuable digital tokens or similar incentives could cross a line into activity that should be regulated, no matter how ‘decentralized’ they say they are.”
Gensler was tapped for the SEC chairmanship this year after a run as a cryptocurrency and blockchain professor at MIT, so he is intimately familiar with the industry.
In the Journal interview, Gensler took issue with the claim by many DeFi developers that because they handed project control over to a decentralized autonomous organization — or DAO — no SEC oversight is required. 
“There’s still a core group of folks that are not only writing the software, like the open source software, but they often have governance and fees,” Mr. Gensler told the Journal. “There’s some incentive structure for those promoters and sponsors in the middle of this.”

Calling the term DeFi “a bit of a misnomer,” Gensler added that most projects “facilitate something that might be decentralized in some aspects but highly centralized in other aspects.”

All Cryptos Securities?

Gensler has also taken issue with the broader cryptocurrency industry’s argument that many digital assets’ initial coin offerings —or ICOs — should not be seen as securities that the agency regulates.
On August 3, Gensler told attendees at a securities industry event, “I believe every ICO I have seen is a security — we have jurisdiction, and our federal securities laws apply.”

The reason, he said, is simple: “[G]enerally, folks buying these tokens are anticipating profits.”

He has promised strong regulation of the industry, arguing that at present that lack of disclosure or effective regulatory oversight of the cryptocurrency market leaves prices open to manipulation and investors vulnerable.
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