The United States Securities and Exchange Commission presented a proposal on Jan. 26ModificationsThe Exchange Act Rule 3b-16 does not mention digital assets and decentralized finance. This could negatively impact platforms that allow crypto transactions. Some cryptocurrency advocates — including SEC Commissioner Hester Peirce — believe that the commission’s extended definition of an exchange could thrust an entire class of crypto entities under the regulator’s jurisdiction, subjecting them to additional registration and reporting burdens. What is the real danger?

Changes proposed

The amendments proposed by the regulator dramatically expand the definition of what an exchange is while eliminating the exemption for systems that merely bring together buyers and sellers of securities while not providing facilities for order execution, which are currently not obliged to register as an Alternative Trading System — a class of trading platform within the SEC’s purview. Furthermore, the proposed rule includes “communication protocol systems” within the scope of the term “exchange.”

What does this mean for cryptography?

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