SEC chief says DeFi platforms are ‘highly centralized’ and will need to register

Gary Gensler, chairman of the US Securities and Exchange Commission, stated that DeFi is highly centralized in certain respects and urged projects working in the sector to register with the SEC.

Speaking to The Wall Street Journal on August 19, Gensler He suggested that the decentralized notions implicit in the term DeFi were “a misnomer”:

“These platforms facilitate something that could be decentralized in some ways but highly centralized in other ways.”

While DeFi projects are designed to be autonomous platforms that operate without a centralized authority, Gensler claimed that many are developed and controlled by a centralized team that is incentivized to promote their platforms.

“There is still a core group of people who are not only writing the software, like open source software, but often have governance and fees,” he said, “there is an incentive structure for those promoters and backers in the middle of this. . “

Gensler expanded on his comments in an Aug. 20 interview with Fox Business and suggested that such DeFi projects are centralized enough to fall under the scope of regulation. He urged DeFi projects to register with the SEC:

“These so-called decentralized financial platforms actually have a lot of centralization. There is a group of entrepreneurs who run these platforms. They should come and, to that extent, work with us and register ”.

Earlier this month, SEC Commissioner Hester Peirce, known colloquially as “Crypto Mom”, echoed similar sentiments from a different angle when warning of “shadow centralization” within the DeFi sector.

Peirce said that “if regulators can find a centralized party or a group of people that they can grab, they will grab,” and called for caution in the way projects are built from scratch.

“If you want to be decentralized, you really need to be decentralized, and that will put you in a different category from a regulator’s perspective because that’s not something we’ve dealt with before,” he said.

Related: Crypto-Friendly CFTC Commissioner Brian Quintenz Reportedly Plans To Step Down

Cointelegraph reported on Aug. 3 that Gensler had identified various encryption policy changes that are being scrutinized by the SEC, including matters related to DeFi, lending platforms, token offerings, stablecoins, exchange-traded funds, and custody.