SEC releases important new regulations that may change the DeFi landscape

Author: Phyrex Source: X, @Phyrex_Ni

The information released by the SEC today does not seem to have attracted much attention in the Chinese field, but it may be a very, very important thing, so important that it may change the landscape of DeFi. (May not be included if assets are less than US$50 million)

Some friends may question whether it is so exaggerated. You can read the new rules first. The rules require:

"Market participants who assume certain dealer roles, especially those that play an important liquidity provision role in the market Participants must register with the SEC, become members of a self-regulatory organization (SRO), and comply with federal securities laws and regulatory obligations."

Can understand What does this mean? Theoretically, this is a requirement for market makers, which require market makers to register with the SEC and:

"Anyone engaging in regulation Persons carrying out the activities described are "dealers" or "dealers in government securities" and, without exception or exemption, are required to: register with the Commission under section 15(a) or section 15C, as applicable; become a member of an SRO; and comply with federal securities laws and regulatory obligations and applicable SRO and Treasury rules and requirements."

Also That is to say, this requires SEC approval and relevant qualifications before you can engage in the role of "market maker". Many friends may still not understand this. This is just a requirement to be a market maker. What does it have to do with DeFi?

This is the biggest problem. There is a role in DeFi called "AMM", and the people who make up this role are called "LP". Do you understand it now? LPs that provide liquidity in DeFi are also called market makers who provide liquidity to AMMs, and the services they provide are actually those of market makers.

So is AMM what the SEC calls "market participants who play certain dealer roles, especially those who undertake important flows in the market?" Market participants who provide roles for sex”, this is not an ambiguous result, let me give you an example.

Suppose project party A issues a coin and then sets up a trading pair on DEX, and the largest liquidity provider in this trading pair is the project party. Then Project Party A complies with the SEC's regulations, because Project A becomes a "dealer."

Of course, if the overall liquidity of A, including the currency price, is very limited, then even if it violates SEC regulations, I believe no one will come to trouble you. , but if A is replaced by a top-level project, and this top-level project attracts a large number of users and funds, and the project party or a certain person becomes the largest liquidity provider, then do you think the SEC will take action? ? Even if you don’t do it directly, what will happen if you match it with the SEC’s slogan

“You are a security”?

Yes, you may say, this is just code, this is decentralized. This is true, but what provides "liquidity" to the code must be a centralized "entity" that owns assets. Of course, you have to say that this is the liquidity pool of the AI ​​group, which is not impossible. Then it depends on the ultimate beneficiary of AI. Who it is, if it is a black hole, then of course it doesn't matter, but if it is an individual entity, this new regulation still applies.

Of course, we don’t know yet whether this regulation will really be extended to the field of Crypto (it has been confirmed that it applies to DeFi), but what we can know is that , this regulation 100% covers the field of Crypto, it just depends on how the SEC will choose to implement it, nothing more.

PS: So what are the disadvantages of this provision? Do you even need to ask? The SEC will not easily attack an individual. The cost of enforcement is too high and the benefits are too low. Moreover, the individual himself will not have much influence on a certain project. However, if he is within the jurisdiction of the SEC's "securities" , then the possibility of receiving a subpoena from the SEC will be very high. To put it bluntly, if you or your project are not on the SEC’s list or sight, then it means that 100% of the pool is yours. But if you or your project The project is being "monitored" by the SEC, so your risk is high.

To give another example, the last time the SEC announced that several Tokens were "securities", and you are one of them and were deemed to be "securities". "Securities" Token's largest liquidity provider, then if you are not unlucky, who else is unlucky?

The "you" here may be the project party, the market maker, or even a large banker. The key point lies in "market participants who play an important role in providing liquidity." Especially when you provide liquidity greater than $50 million.

PS2: It seems that the threshold of US$50 million has not yet been decided. For now, let’s calculate it as US$50 million. US$50 million was just a number that Gary said after hesitation at the time. , may not be the final one.