Key facts:
The new regulation would demand a registry for those who operate on exchanges.
The project has not yet been made official, but it has already generated rejection and public clarifications.
Coin Center, a non-profit organization focused on the analysis of cryptocurrency regulations, assured that the new amendment of the United States Securities and Exchange Commission (SEC) includes sensitive changes and “hidden by complex language” that make it unconstitutional.
In the publicationCoin Center states that it submitted a letter to the SEC to present its position on a proposal from the public body that seeks to modify the regulation of the Alternative Markets System. What this organization questions is the proposed definition of the term «exchange«, that is, the exchange houses where you can access the sale of crypto assets.
In the new proposal of the SEC, according to Coin Center, the First Amendment of the United States Constitution is violated by demanding a registration obligation for its use, even when it comes to open source developers. The First Amendment to the US Constitution is the one that protects the right to free expression, among other powers of citizens such as freedom of religion, press and assembly.
Specifically, the conceptual “trap” that Coin Center finds is in the change in the definition of exchange. In this, the concept of the regulated conduct of “gathering orders” and “using methods” is replaced by “uniting buyers and sellers” and “making available communication protocols” at the time of making the exchanges. In these points, meeting and communication, it is where it collides with what the First Amendment says, they believe from Coin Center.
According to the vision of those who issued the statement, this it is done covertly, appealing to legal technicalities based on legal background. They add, therefore, that the Supreme Court of Justice will rule against the new regulation as soon as it is presented.
In the letter with comments sent to the SEC also details that “cryptocurrencies and decentralized finance are not mentioned even once in its 200 pages.”
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The effect of the definition proposed by the SEC would be clear, according to Coin Center, and would imply that anyone who develops or distributes decentralized exchange (DEX) software would be breaking the law if they don’t register. DEXs, precisely, are exchanges that operate without intermediaries and do not require their users to identify themselves personally to use them.
According to the vision of those who issued the statement, the change indicated it is done covertly, appealing to legal technicalities based on legal background. They add, therefore, that the Supreme Court of Justice will rule against the new regulation as soon as it is presented.
In the letter with comments sent to the SEC also details that “cryptocurrencies and decentralized finance are not mentioned even once in its 200 pages.”
Does the SEC change its position on cryptocurrencies?
This newspaper reported in early 2022 how the SEC showed a more permissive posture towards cryptocurrencies since the inauguration of Gary Gensler at the head of the agency, which is responsible for regulating the financial markets of the United States. This was reflected in the decreasing number of legal actions against cryptocurrency projects compared to previous years.
However, assuming Coin Center’s arguments are valid, this amendment to the existing regulation could mean a step by the SEC in the opposite direction. If the proposal questioned for its alleged unconstitutionality is actually presented, it could be an attempt by the public body to adjust the regulations in the field of cryptocurrencies.
DEX, keys to user privacy
Decentralized exchanges are often included in the decentralized finance (DeFi) category because they connect users directly, without intermediaries.
Thus, it is possible to operate in them directly, without the need for registration or personal identification and from the wallets of each user, as explained in the CriptoNoticias Cryptopedia.
Compared to traditional exchanges, which are centralized and whose users are subject to determinations by the companies that control them, DEXs provide more privacy to users. To do this, they rely on methods such as multi-signature transactions and smart contracts to offer security when operating.
As regulations on cryptocurrencies increase, these types of services that provide greater freedom when managing funds become more important. As CriptoNoticias has reported, these platforms showed sustained growth in popularity from 2019 to 2021.