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Decentralized finance, popularly known as DeFi, is rapidly growing, and this growth seems to have attracted the attention of the US Securities and Exchange Commission (SEC). A commissioner of the SEC has issued a report urging DeFi platforms to reach out.
SEC Commissioner, Caroline Crenshaw, has published a report titled “Statement on DeFi Risks, Regulations and Opportunities.” The report looks at the regulations, risks and opportunities present in the DeFi ecosystem.
SEC concerned about DeFi
The SEC noted that the DeFi sector needed to be regulated because it had a close resemblance to the products offered in the traditional financial sector. Crenshaw noted many risks associated with DeFi, which were mainly caused by the lack of regulations.
“DeFi participants’ current “buyer beware” approach is not an adequate foundation on which to build reimagined financial markets,” the report stated. Crenshaw stated that the SEC was among the bodies that have authority over the operations of DeFi platforms. However, she also noted that no DeFi platform had registered with the regulator.
Due to the lack of regulations in this sector, investors were left unprotected. DeFi platforms were urged to reach out to the SEC’s FinHub to receive expert advice on their compliance goals and on what they have achieved so far in matters regulations. “It is my understanding that FinHub has never refused a meeting, and their engagement is meaningful.”
Major hurdles with DeFi
Crenshaw stated that there were major hurdles that surrounded the DeFi sector. These structural hurdles created a lack of transparency and pseudonymity. In this case, large investors were making major gains, while small investors had very little chance of succeeding with their small investments.
However, the SEC noted that it was willing to work with projects in the DeFi sector to achieve maturity. However, the commission notes that there is still a long way to go before achieving regulatory clarity.
The DeFi sector has rapidly grown this year, where the total value locked (TVL) on the platform has grown to over $178 billion. However, the commissioner noted that achieving DeFi compliance would not be an easy or quick process.
Your capital is at risk.
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