- SEC withdraws appeal, ending legal battle over broker-dealer rule for DeFi protocols.
- Court ruling blocks SEC’s attempt to redefine “dealer” for crypto liquidity providers.
- SEC leadership change signals a more balanced approach to crypto regulation moving forward.
The US Securities and Exchange Commission (SEC) has withdrawn its legal challenge to a court ruling establishing the broker-dealer rule. This rule would have also expanded the SEC’s oversight of decentralized finance (DeFi) protocols. The decision was filed on February 19th with the Fifth Circuit Appeals Court. There were no arguments or disputes when the filing was made, and the legal contest is hereby over.
The SEC had moved to change the definition of a “dealer” to capture entities that provide liquidity in these cryptocurrencies. This change would have compelled these providers and automated market makers with greater than $50m capitalization to register with the SEC.
In November, a federal court in Texas halted the rule, claiming that the SEC had exceeded its mandate. Therefore, the court dismissed the broad definition of “dealer” under the existing law the agency was trying to establish. This means that the legal battle brought by the SEC to the appeals court is effectively over.
Crypto Industry Victory
Blockchain Association’s chief executive officer Kristin Smith, welcomed the decision. She described it as a ‘complete and total victory’ for the crypto industry. According to Smith, the industry could now let it breathe and heave a sigh because it was no longer under the imminent attack of the SEC’s broad rules. Many see this as a major win for decentralized finance.
The decision was made during the change in the SEC leadership. When Gary Gensler resigned from this position, President Donald Trump appointed Mark Uyeda as SEC’s acting chair. Under the leadership of the current Chair, Gary Uyeda, the SEC has taken a rather pragmatic tone toward digital assets.
Related: Trump Moves to Make U.S. a Crypto Hub and Ends Crypto Curbs
SEC’s New Crypto Strategy
The SEC has suspended several enforcement cases initiated under Gensler’s current chair. The agency has also established a Crypto Task Force, with Hester Peirce as the commission’s official leading the group. This task force seeks to establish guidelines for regulating the use of digital assets.
However, this ruling means there is room for crypto exchanges, as the SEC may still regulate the space. It may suggest that the agency will be more objective going forward. The outcome indicates that authorities have shifted their approach to the developing crypto sphere. It also creates a precedent when approaching future regulations in the industry context.
