Gary Gensler, the chairman of the US Securities and Exchange Commission in a recent comment declared that the financial regulators could someday perform oversight functions on projects in the decentralized finance space.
Gensler made this statement during a recent interview with Wall Street Journal where he noted that DeFi projects that offer rewards to participants with valuable tokens or related incentives, could come under the agency irrespective of their decentralized nature.
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. There’s some incentive structure for those promoters and sponsors in the middle of this.
The SEC chairman argued that not all services offered in that crypto space are entirely decentralized. According to him, Defi is “a bit of a misnomer” as they sometimes “facilitate something that might be decentralized in some aspects but highly centralized in other aspects.”
He continued that the functions of some DeFi platforms are equivalent to peer-to-peer lending platforms that are under the watch and regulation of the commission.
It is worth noting that Gensler has been frequent in his calls for regulation of the crypto space. You will recall that earlier in August, the SEC chairman said
In my view, the legislative priority should center on crypto trading, lending, and DeFi platforms. Regulators would benefit from additional plenary authority to write rules for and attach guardrails to crypto trading and lending.
His reason for the frequent call for DeFi Aand crypto regulation has always been to protect investors from risks.
DeFi is coined from the words decentralized finance. It is a blockchain-based finance alternative for the traditional financial system. DeFi utilizes smart contracts on blockchains, the most common being Ethereum, and its operation is mostly decentralized.