By Chris Prentice
NEW YORK (Reuters) – The U.S. Securities and Exchange Commission (SEC) on Friday will weigh reopening a 2022 proposal that would expand the definition of an “exchange” following pushback from the cryptocurrency industry which fears being ensnared.
The commissioners are expected to take a rare public vote on whether to ask for more comments from the public on the plan. Crypto firms have questioned whether the changes would cover their industry, including decentralized finance, or DeFi, platforms.
The regulator’s January 2022 proposal would expand the definition of an exchange to include platforms that use “communication protocols” such as request-for-quote systems. The change, if adopted, is expected to capture many more venues beyond traditional exchanges that bring together orders from multiple buyers and sellers in a marketplace.
Typically, commissioners would decide behind-the-scenes if extending a public comment period is necessary.
The proposal has stoked already rising tensions between the crypto industry and the SEC. Crypto firms, which have complained about the SEC’s failure to provide regulatory certainty for their industry, said the proposal was vague and would give the SEC a tool to pull Defi platforms within its oversight.
Some DeFi platforms may fall under the proposed definition, but others may already be considered exchanges by the existing definition, SEC officials said this week.
The officials estimated about dozen crypto firms would fall under the expanded definition, but declined to provide any more specifics about which firms.
“Make no mistake: many crypto trading platforms already come under the current definition of an exchange,” SEC Chair Gary Gensler said in prepared remarks published on Friday.
Most crypto trading platforms meet that definition, regardless of whether they call themselves decentralized, Gensler said.
The SEC plans to give more information on what trading systems for crypto securities would be included in the proposed definition.
(Reporting by Chris Prentice; Additional reporting by Hannah Lang; Editing by Sharon Singleton)
