"Hey, the SEC is really strict with crypto, you can't just chill."
The Securities and Exchange Commission (SEC) implemented new regulations that broadened its reach to include cryptocurrency market participants involved in digital asset transactions considered securities including falling under the decentralized financial sector.
The move aims to strengthen investor protection as it brings about major changes to the way liquidity providers in the crypto space conduct business that require them to register as dealers or dealers in government securities under certain conditions.
So here it can be seen that individuals who carry out the activity of buying and selling digital asset securities to provide liquidity into the crypto market are now required to register and follow the current securities regulations.
However, it should be known that the implications of the regulation in the DeFi ecosystem can affect automated market makers (AMMs) and other DeFi protocols following AMMs that facilitate trading through liquidity pools locked in smart contracts that are currently under scrutiny.
The streak, concerns in the crypto industry have been sparked and this has led many to criticize the SEC's regulations as overreaching in imposing traditional securities laws on the DeFi space.
High-profile responses from organizations such as the DeFi Education Fund and the Chamber of Digital Commerce showcased their frustration at what many viewed as the crypto space's lack of clarity, engagement and regulatory guidance from the SEC.
While the rule was adopted by the opposition, in particular Commissioner Hester Peirce was vocal about her doubts and she wondered if she wanted to apply such a rule to a software protocol like AMM.
The debate within the SEC reflects broader uncertainty over the appropriate way to integrate the burgeoning crypto market into the existing regulatory framework without stifling innovation or undermining investor protection.
