SEC Reconsiders Expanding Definition of ‘Exchange’ to Include Crypto: Acting Chairman
Acting SEC Chairman Mark Uyeda said Monday that the proposal attempted to “contain the crypto market.”
The Securities and Exchange Commission (SEC) is reconsidering how a proposal to expand the definition of “exchange” could be tailored to exclude entities that facilitate cryptocurrency trading, Acting SEC Chairman Mark Uyeda said Monday.
The proposal was originally introduced in 2020 to establish clearer rules for alternative trading systems, which primarily impact the U.S. Treasury market, Uyeda said. However, under former SEC Chairman Gary Gensler, the definition of “exchange” was expanded to include protocols used to trade crypto assets, requiring them to register with the agency.
“I think it’s a mistake to tie Treasury market regulation to a heavy-handed attempt to suppress the cryptocurrency market,” Uyeda added.
Uyeda’s criticism is one of many that disagree with Gensler’s decisions. The former SEC chairman, who has been skeptical of cryptocurrencies, has repeatedly stressed that the cryptocurrency market needs to be subject to the same regulations as other parts of the financial markets.
The proposal to expand the definition of “exchange” has gone through several rounds of public feedback since it was introduced more than five years ago. While the guidance has yet to go into effect, the SEC said it is in the “final rulemaking stage.”
The rule refers to “communication protocols that bring together buyers and sellers of securities.” However, there is no clear definition of what a “communication protocol” is, and Uyeda said the rule extends beyond government securities.
In the past, several companies in the crypto industry, including Coinbase, have criticized the SEC’s proposal. Coinbase’s chief legal officer Paul Grewal called the agency “overreach” by intentionally leaving vague sections of the 600-page proposal that could impact decentralized finance (DeFi) protocols.
Since Gensler’s resignation, the SEC has embarked on a new chapter. The agency has said it will take a more collaborative approach with the crypto industry.
In January, Uyeda announced the creation of a crypto task force led by SEC Commissioner Hester Peirce, a crypto advocate, to create clearer industry rules. The SEC said the initiative is intended to provide more transparency about “who must register” with the regulator.