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Regulation: SEC commissioner aims to remove anonymity in the DeFi sector

regulation

TL;DR Breakdown

  • The commissioner wants a regulation that will eliminate anonymity
  • She wants DeFi developers to be involved in building a favorable regulatory framework
  • Crenshaw advises on market manipulation

The DeFi sector is a vast sector that provides traders with huge opportunities to invest and make profits. Despite this being so, the industry is known for its horrendous security challenges, among other illicit activities. Recently, regulators have put in effort to make regulations to guide the sector, even though it goes against the tenets of the crypto sector.

In the recent statement, the US SEC boss, Caroline Crenshaw, talked about the many advantages in the sector. However, Crenshaw noted that should regulators develop the regulation, users should not hesitate to follow it.

DeFi developers to work with the SEC

Caroline Crenshaw gave her opinion of the sector in a document titled DeFi risks, Regulations, and Opportunities. The article is the first piece that will be published under The International Journal of Blockchain Law. In the article, she mentioned that the sector needs to tackle issues related to anonymity and transparency before the regulation can be made. She also noted that the DeFi sector lacks regulations and protections that traders who carry out activities in other sectors enjoy.

Talking about the issue of transparency, Crenshaw said that there are no laws in the DeFi market to address market protection. She said it has caused the market to be split into two factions where only professionals and insiders enjoy the massive rewards. Crenshaw believes that retail traders suffer the most compared to professionals, even though most protocols claim that their codes are open source.

The SEC boss wants regulation to tackle market manipulation

In her opinion, Crenshaw believes that a rewarding system should not be built so that only professional investors can decipher the codes. Going further about the regulatory framework, Crenshaw spoke about anonymity and how it has helped market manipulation. She pointed out that most market manipulations occur through bots because no one can track pseudonymous traders.

Crenshaw noted that retail investors are open to huge losses because some key elements are not available for them to go through. Furthermore, Crenshaw hopes that DeFi protocols can have a hands-on approach with the SEC regarding a regulatory framework. Although she believes that the anonymous nature is one key element of the DeFi sector, traders prefer to make money over being anonymous. In a conference on Oct 12,

The SEC boss mentioned that the digital market sector could be guided with regulatory frameworks like gatekeeping employed in other sectors. Although Crenshaw’s opinion does not go in line with the thought of Senator Elizabeth Warren and Dan Berkovitz, it has a higher chance of acceptance compared to that of Hester Pierce. United States SEC commissioner Hester Pierce opined that protocols developers must be granted a grace period of three years to build a protocol.

Owotunse Adebayo

Owotunse Adebayo

Adebayo loves to keep tab of exciting projects in the blockchain space. He is a seasoned writer who has written tons of articles about cryptocurrencies and blockchain.

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