Consensys Requests SEC to Exclude DeFi Protocols from Crypto Exchange Definition
Consensys Software Inc. has addressed Hester Peirce of the US SEC, urging the crypto task force to exclude Decentralized Financial (DeFi) protocols from being classified as crypto exchanges. Consensys lawyer Bill Hughes stated they are prepared to discuss their points with the SEC.
The key arguments include:
- Current regulatory uncertainties hinder blockchain development in the US
- SEC's actions may violate First and Fifth Amendments regarding content-based regulation and free speech
Consensys expressed willingness to assist in creating a regulatory framework that clarifies securities laws and requested reconsideration of proposed amendments.
Legal Challenges and Legislative Support
On June 28, 2024, the SEC sued Consensys over alleged unregistered security offerings via MetaMask staking, claiming violations related to liquid staking tokens stETH and rETH. The SEC also charged MetaMask for operating as an unregistered broker.
With a leadership change to pro-crypto President Donald Trump, Consensys hopes for case dismissal and favorable DeFi protocol classification. Trump's investments in crypto through World Liberty Financial support this outlook. The SEC has dismissed charges against Coinbase Global Inc. and paused litigation against Binance.
Senator Cynthia Lummis is advocating for clearer SEC guidelines on digital asset exchange-traded products (ETP) staking, emphasizing competitive disadvantages for US investors compared to other jurisdictions like the UK.
Lummis stated, “Digital assets are the future. The U.S. can either pave the way or fall behind.”
Under new SEC leadership, dismissals of prior litigations against the crypto industry are anticipated.