SEC reopens comments on proposed changes to “exchange” definition

The U.S. Securities and Exchange Commission has reopened the comment period on proposed amendments to its Exchange Act, as announced on April 14.

SEC aims to broaden “exchange” definition

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

Specifically, the new definition could broaden the definition of exchange to require registration from services that are not usually considered exchanges, such as DeFi platforms. This possibility is acknowledged by the SEC in the current announcement.

However, the SEC has not yet made the proposed changes.

SEC Chair Gary Gensler said that the comment period “will help address comments … from various market participants, particularly those in the crypto markets.” He nevertheless affirmed that securities laws already apply to many crypto 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 toward the cryptocurrency industry, has published a letter of dissent on the SEC website.

Peirce wrote that the change would prevent innovation, adding that the SEC previously opted against applying regulations to emerging platforms in the 1990s for this reason. She asserted that the SEC aims to use its authority to “solve problems that do not exist.”

The advocacy group Coin Center has reiterated its earlier criticism, arguing that the change is “unconstitutional.” Other industry members including Coinbase and the Blockchain Association expressed criticism toward the change in early 2022.

The proposed change is just one of the SEC’s many attempts to regulate the crypto industry more thoroughly. Recently, the SEC has enforced rules against staking and earning services and has advanced changes that could affect crypto custody.

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