Why Consensys is Throwing a Tantrum Over SEC's DeFi Drama! 😱💔

So, here we are, folks! The ever-so-charming blockchain software company, Consensys, has decided to pen a little love letter to the US Securities and Exchange Commission (SEC). And guess what? They’re asking the SEC to kindly drop a proposed definition amendment that could lump DeFi protocols in with securities exchanges. Because, you know, who doesn’t love a bit of regulatory overreach? 🙄

Consensys Throws Shade: SEC’s Proposed Exchange Rule is a Total No-Go

In a recent submission to the SEC’s crypto task force (led by the fabulous Commissioner Hester Pierce, of course), William C. Hughes, Senior Counsel at Consensys, laid out a buffet of reasons why the Commission should reconsider its proposed change to the definition of “exchange” under US securities law. Spoiler alert: it’s not pretty! 😬

First off, Hughes points out that the proposed rule change is like that one friend who always takes things too far. It goes way beyond what Congress intended when they defined an “exchange” back in the glamorous days of 1934. Instead of just being a marketplace for buyers and sellers of securities, these amendments are trying to rope in DeFi protocols, which are just chilling and passively being used by traders. Talk about overstepping! 🙈

But wait, there’s more! Hughes argues that these amendments are also breaking the Administrative Procedure Act (APA) like a piñata at a birthday party. The SEC apparently didn’t bother to consider key points raised in public comments back in 2022. You know, the ones that said decentralized protocols, if classified as exchanges, would probably fail to meet the SEC’s operational requirements. Sounds like someone has a predetermined agenda to ban these projects from the US! 😒

And here’s the kicker: Hughes claims that the proposed rule changes don’t even offer a single real-world benefit. It’s just a ploy to extend the SEC’s regulatory authority. He’s like, “Hello? Can we get a cost-benefit analysis that actually captures the hundreds, if not thousands, of blockchain projects that would be affected?”

In a dramatic statement from Consensys, they said:

As an initial matter, the number of entities that would be affected by the amendments is substantially undercounted: we are told that there would be only 35 to 46 New Rule 3b-16(a) Systems, between 15 and 20 of which trade digital assets. 88 Fed. Reg. at 29465, 29474. That number is far too low when, especially given the amendments’ expansive but amorphous scope, when we are dealing with an ecosystem with hundreds if not thousands of projects and protocols.

But wait, there’s even more drama! Hughes also highlights that the SEC amendments are violating the First Amendment like a bad reality TV show. They’re trying to cover all “communication protocols” between parties with trading interests, regardless of whether anyone actually said anything. And let’s not even get started on the vague terms like “communication protocols” and “the level of causation required for a group to be deemed to be ‘bringing together’ individuals with trading interests.” It’s a recipe for a due process disaster under the Fifth Amendment! 😱

So, Consensys is basically begging the SEC’s crypto task force to take a good hard look at these points and remove this definition change from their regulatory agenda. Because who needs clarity when you can have chaos, right?

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2025-02-23 15:36

Why Consensys is Throwing a Tantrum Over SEC’s DeFi Drama! 😱💔

Consensys Throws Shade: SEC’s Proposed Exchange Rule is a Total No-Go

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