Hester Peirce, commissioner for the United States Securities and Exchange Commission, explained during an exclusive interview with Cointelegraph that decentralized finance, also known as DeFi, has created new challenges for the SEC.
Peirce, nicknamed “Crypto Mom” for her interest in digital-asset innovation, mentioned that the quickly rising DeFi sector has resulted in a number of unresolved legal issues:"DeFi has posed a challenge for the SEC in a similar way that the ICO boom did in 2017. What is different here is that the pace of DeFi has actually been much faster. I also think that the legal issues are more difficult to sort out on the DeFi side.”
Although Peirce shared that regulations around DeFi projects may fall outside of the SEC’s purview, some of these projects will likely touch on securities laws. To Peirce’s point, John Whelan — managing director of Santander Bank and chair of the Enterprise Ethereum Alliance — told Cointelegraph that from a financial perspective, DeFi has the potential to enable autonomous programmable digital securities in the future.
However, this remains a long-term goal, as most DeFi offerings consist of tokens that lack liquidity and are used to fund blockchain projects. Still, Peirce advised caution to those involved in the DeFi space. During a fireside chat with Whelan for the "Ethereum in the Enterprise — Asia Pacific" online conference, Peirce mentioned that the crypto community must be cautious when building DeFi projects:“I caution people to think about what they’re building, and to think about whether it looks like the traditional security. If it does, talk to the SEC because individuals can really get in trouble if they develop one of these things. That would be my advice.” DeFi challenges SEC by taking away intermediaries
In addition to legal hurdles, Peirce pointed out that the goal behind decentralized finance is removing third-party intermediaries, such as banks and exchanges...