The U.S. Securities and Exchange Commission (SEC) has approved new rules that integrate cryptocurrency into federal oversight by approving new rules targeting entities with significant roles in providing market liquidity.
The regulator voted 3-2 during a Tuesday meeting, on a proposed 194-page form that included regulations to include individuals and entities engaging in cryptocurrency transactions that are classified as securities or government securities, provided they manage assets over $50 million.
This 247-page regulation aims to bring certain cryptocurrency transactions under the same regulatory umbrella as traditional securities. Specifically, the rules will impact the decentralized finance (DeFi) sector, which has expressed considerable opposition, arguing the unique nature of DeFi — operating without a central authority and being purely software-driven — makes the application of such rules impractical and unreasonable.
Criticism also came from within the SEC, with Republican Commissioner Hester Peirce, who voted against the adoption, voicing her concerns during the meeting. The DeFi Education Fund has outrightly labelled the new regulation as “misguided and unworkable,” reflecting the broader crypto industry’s resistance to the rule first proposed in March 2022.
SEC Chair Gary Gensler defended the regulation, emphasizing its necessity for investor protection in a rapidly evolving market landscape marked by electronic and algorithmic trading advancements.
He highlighted that many firms, acting as unofficial market makers without SEC registration, fail to meet requirements such as data reporting and record-keeping, underscoring the rule’s role in addressing these gaps.