SEC Moves to Revise DeFi Oversight As Industry Challenges Regulation ATS

The SEC is reconsidering DeFi regulations after industry concerns about high compliance costs and impact on innovation.

Regulation ATS aimed to include DeFi platforms as exchanges but faced strong opposition from crypto industry leaders.

The SEC and CFTC are working together to create clear rules and reduce conflicts in digital asset oversight.

The U.S. Securities and Exchange Commission is reviewing changes to a proposed rule that would have subjected decentralized finance platforms to enhanced regulatory scrutiny. SEC official Mark Uyeda instructed his staff to investigate ways to remove crypto elements from the proposed ATS regulations. This decision follows strong criticism from industry leaders who raised concerns about regulatory burdens.

Proposed Rule Faced Strong Opposition

The original proposal aimed to redefine exchanges so it would include communication protocols in the crypto sector. If enacted, DeFi platforms would have been required to register as regulated exchanges

Critics warned that such measures could slow innovation and create compliance challenges. The SEC has noted these concerns and is now reconsidering its stance on DeFi regulation.

Policy Reversals Under New SEC Leadership

Uyeda’s move marks another shift in SEC policy since the departure of former Chair Gary Gensler. Under his leadership, Regulation ATS was revised so it could potentially include DeFi platforms under its oversight

The latest reconsideration suggests a more flexible approach to crypto regulations. The SEC has also withdrawn strict crypto accounting guidance and has dropped enforcement actions against some industry participants.

Legal Challenges Against DeFi Regulations

Industry leaders have challenged the SEC’s proposed DeFi rules because they argue the rules exceed the agency’s legal jurisdiction. ConsenSys, a blockchain technology company, has called for the complete withdrawal of the rule

The company claims that forcing decentralized projects to register as exchanges and meet disclosure requirements is not practical.

Future of Crypto Regulations

The SEC's recent review represents their extensive work to develop improved oversight for digital assets. The SEC along with the Commodity Futures Trading Commission are collaborating to develop better regulatory guidelines

The collaborative initiative aims to settle existing conflicts and develop standardized supervisory architecture for digital assets operating within U.S. borders. The current regulatory changes indicate a shift toward a balanced regulatory framework for cryptocurrencies.