Crypto firm ConsenSys has submitted a letter to the United States Securities and Exchange Commission (SEC), voicing its concerns about the proposed amendments to the definition of “exchange” under US Federal Securities laws.
The firm urges the agency to reconsider and withdraw this crypto regulatory move. Noteworthy, the said move will see the definition of “exchange” include Decentralized Finance (DeFi) platforms.
ConsenSys Request Can Boost DeFi on L2
In the letter, addressed to Commissioner Hester Peirce and the newly established Crypto Task Force, Consensys noted that the proposed amendment is a violation of the Administrative Procedure Act (APA).
It improperly broadens the regulatory scope for crypto. The MetaMask developer also cited how the rules are a contradiction of the US Constitution.
Apparently, it imposes wrongly on decentralized protocols that should traditionally not be categorized as an exchange, expecting them to follow exchange regulations.
Also, Consensys highlighted that the SEC was overreaching. For more context, the firm says the proposed amendment is beyond the agency’s jurisdiction or legal authority.
It is worth noting that this is not the first time that this SEC amendment is meeting with a roadblock.
In 2022 when it requested the public’s comments on the proposal, there were numerous oppositions to the DeFi exchange amendment.
This 2022 comment period and some other prior submissions were referenced by ConsenSys to reinforce its position on the matter.
Consensys Ask to Discuss SEC Proposal With Crypto Task Force
According to ConsenSys’ lawyer Bill Hudges, the crypto firm had earlier highlighted a few shortcomings of this amendment in two previous submissions.
Consensys believes strongly that this SEC amendment will impact negatively on blockchain development and DeFi adoption.
For perspective, the proposal allegedly holds the potential to stifle innovation and discourage creativity.
The existence of regulatory uncertainty could discourage developers and users in the blockchain space.
On this premise, Consensys has hinted at its willingness to discuss the matter with the Crypto Task Force. If not, it expects that SEC’s proposed rule be erased from the regulatory agenda.
SEC to Dismiss Coinbase Lawsuit
There is no certainty that the SEC will yield to ConsenSys’ request. However, it is worth noting that the establishment of the Crypto Task Force gives digital asset service providers an edge.
Those crypto firms who were faced with regulatory scrutiny before Donald Trump became the President of the United States, may have lawsuits end in their favor.
This is because of the introduction of more crypto-friendly policies in the new administration.
American cryptocurrency exchange Coinbase has already secured a win in its legal debacle with the US SEC. This concerns the securities classification of some of the assets trading on its platform.
Both parties reached an agreement on February 21, 2025, to drop the agency’s lawsuit, pending a formal vote by SEC commissioners next week.
This was considered a win for the general crypto ecosystem and could largely be attributed to the pivot in America’s crypto landscape.
Unlike before when Gary Gensler led the SEC with a regulation-by-enforcement approach, Mark Uyeda has brought a more favorable approach.
This new government has resorted to implementing more pro-crypto policies.
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