SEC Faces Storm of Criticism from Crypto Sector, Lawmakers over ‘Exchange’ Re-definition Plans

Source: AdobeStock / Zacarias da Mata

The United States Securities Exchange Commission (SEC) and its Chairman Gary Gensler have received a slew of letters from pressure groups and parliamentarians voicing their concerns about proposed amendments to the Exchange Act, established in the 1930s. The agency plans to expand the legal definition of what an exchange is.

Patrick McHenry, the ranking member of the House Financial Services Committee, and Bill Huizeng, the ranking member of the subcommittee on Investor Protection, Entrepreneurship and Capital Markets, sent Gensler an open letter complaining that the amendments could stifle innovation in the crypto sector.

Broadening the definition of an exchange would force other players to register with the SEC and other regulators, and could increase the amount of red tape crypto players outside the centralized exchange sphere need to contend with.

McHenry and Huizeng wrote:

“The SEC fails to identify the problem that the rulemakings are intended to solve, particularly as it relates to requiring certain market participants facilitating digital asset transactions to register with the SEC.”

The Washington DC-based crypto think tank Coin Center has previously weighed in on the matter, claiming that the proposed amendments could run counter to the American constitution. The body also warned of the dangers of “an inappropriately broad standard for registration” implicit in the SEC’s proposals.