The fight between the cryptocurrency industry and the Securities And Exchange Commission (SEC) continues with The Blockchain Association, a prominent crypto advocacy group, having filed a lawsuit against the SEC in a Texas court, challenging the regulator’s recently adopted definition of “dealer” in securities markets.
What’s the Problem With The New Rule?
The lawsuit argues that the SEC’s new definition unlawfully expands its authority by capturing activities within the realm of decentralized finance (DeFi), The Wall Street Journal reported.
Under the new rule, liquidity providers on DeFi protocols, who use automated systems to facilitate trading, could be classified as “dealers” subject to the same regulations as traditional securities dealers.
Not Everyone Agrees With The SEC
The SEC’s revised definition has drawn criticism from within its own ranks, with Commissioners Hester Pierce and Mark Uyeda voicing concerns about its reach and potential stifling effect on innovation.
Industry groups, including the Blockchain Association, submitted comment letters during the public comment period, arguing that the rule exceeded the SEC’s legal authority.
The lawsuit alleges the SEC disregarded the concerns raised in these comments, including those from the Blockchain Association.
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“This is the latest example of the SEC’s blatant attempts to regulate outside its authority,” declared Kristin Smith, CEO of the Blockchain Association.
Potential Impact: Brain Drain And Stifled Innovation
The Blockchain Association warns that the new dealer rule could have a chilling effect on the US crypto industry.
Smith suggests the rule could push American innovators and companies overseas, hindering further development in the digital asset space.
What’s Next: The ongoing battle between the SEC and the crypto industry highlights the complex regulatory landscape surrounding digital assets.
If you’re interested in staying informed about the latest developments in crypto regulation and how it affects the future of DeFi and other aspects of the digital asset ecosystem, then consider attending the Benzinga Future of Digital Assets event on Nov. 19.
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