SEC Redefining ‘Distributor’ Expands Regulation of Crypto, DeFi

The U.S. Securities and Exchange Commission on Feb. 6 approved rules requiring more market participants to register with it, join a self-regulatory organization and comply with federal securities laws and regulations. The new rules could bring crypto and decentralized finance into greater regulation.

The new rules, the article runs 247 pages, are presented in 2022. The Securities Act regulations redefine the phrase “dealer” and “dealer of government securities” as well as “as part of regular business.” In the year It was used in the Securities Exchange Act of 1934.

The rules apply to market participants that “provide significant liquidity in the markets”. Specifically, under the new definitions, a dealer can earn income by “buying at or close to the best prices available on either side of the market for the same security” or “mainly holding bid-ask spreads.” and selling at a discount or holding incentives offered in trading positions to liquidity – to provide trading interest. SEC Chairman Gary Gensler in a statement

“These measures are common sense. […] Absent an exemption or exception, anyone who trades in a manner consistent with fair market practice must register with us as a seller — consistent with the intent of Congress.

There is a lower limit on the application of the new rules. Distributors must own or control $50 million to be liable.

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The rules were approved on a party-line vote, with the two Republican SEC members voting against. The 2022 bill, 194 pages long, makes no mention of crypto except in one footnote. However, it has faced opposition from the crypto industry and pro-crypto politicians. The final rule gives the whole room to crypto. He explained.

“The dealer framework is a functional analysis based on the securities trading activities a person engages in, not the type of security he sells.”

Four of the five members of the SEC have issued statements on the rule change. Republican Mark Uyeda said the rule change was excessive and said, “Today's action reflects the Commission's view that the definition of ‘distributor' is practically unlimited.” The public should be concerned about the scope of this claim. Hester Peirce, another Republican at the SEC, did not comment.

Commissioner Caroline Crenshaw, in support of the changes, said: “There is a clear loophole here: market participants with large market volumes are engaged in the activities of distributors without registering as dealers.”

The regulations will take effect 60 days after they are published in the Federal Register.

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