The U.S. Securities and Exchange Commission has issued a new definition for securities dealers, encompassing crypto, in a move that could be a game-changer for the sector.

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The Big Picture

The U.S. Securities and Exchange Commission has dealt a major blow to the crypto industry by redefining what constitutes a securities dealer. This move has the potential to significantly impact the legal landscape for decentralized finance (DeFi).

Simultaneously, the SEC has revealed its stance on crypto policy, signaling further forthcoming regulations. This is evident from its proposal to revamp the definition of exchanges, with implications for crypto platforms, reflecting the agency’s attempt to standardize oversight of digital assets firms under securities laws.

Exploring the Regulations

In the depths of the SEC’s final rule document, the commission acknowledged the possibility of exempting DeFi from the new definition. However, it ultimately disregarded industry feedback and decided against such exemptions, a move that was narrowly approved in a 3-2 vote, with both Republican commissioners openly opposing the decision.

While cryptocurrency lobbyists have long clamored for regulatory clarity from the U.S. government, the SEC’s recent efforts have not aligned with their expectations. Apart from redefining dealers and exchanges, the agency has also proposed stringent custody restrictions for handling customers’ crypto assets, a definition that may exclude leading crypto platforms.

The timeline for completing the exchange definition and custody restrictions sits around April, as per the SEC’s official agenda. These regulatory pursuits, if pursued without considering the challenges faced by crypto businesses, could corner the firms into existential crises or non-compliance, potentially leading to legal battles with the regulator.

This Week

• Craig Wright is facing the Crypto Open Patent Alliance in court this week. Read CoinDesk’s coverage at the following links: (link), (link), (link), (link)

Thursday

• 19:00 UTC (2:00 p.m. EST) A subcommittee on the House Financial Services Committee will hold a hearing on crypto and illicit finance.

• (Wired) The night FTX filed for bankruptcy, it was hacked and hundreds of millions of dollars’ worth of crypto were stolen. A recent Department of Justice indictment suggests what happened, Wired’s Andy Greenberg reports.
• (Asterisk Magazine) Headline aside, this is an excellent, easy-to-understand article about the complex system of regulations and industry advances that keep passengers safe when traveling by air.
• (Law.com) The First Circuit Court of Appeals will review whether the IRS can demand crypto investor data from exchanges, tied to James Harper’s long-running case against the IRS collecting data from Coinbase.
• (The Onion) Lol.

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