3. October 2023

SEC Seeks to Regulate DEXs: Crypto Mom Responds

• The SEC is expanding its plans to regulate the crypto market, including decentralized exchanges (DEXs).
• This is being done by reopening an existing proposal related to consumer protection laws and applying it to digital asset trading platforms.
• SEC Commissioner Hester Peirce has strongly disagreed with this move, arguing that DEXs should not be treated the same as centralized exchanges (CEXs).

SEC’s Plans to Regulate Crypto Market

The Securities and Exchange Commission (SEC) is taking steps to bring crypto exchanges under its regulatory purview – including decentralized finance (DeFi) exchanges. On Friday, the agency announced that it was reopening an old proposal from January 2022 related to consumer protection laws that would explicitly put digital asset trading within its scope.

Existing Rules for Trading Platforms

This proposal would extend existing rules governing securities exchanges to systems that provide protocols for buyers and sellers of any type of security. These systems would need to register as either exchanges or broker-dealers and comply with regulations set out by Alternative Trading Systems. While the original proposal didn’t mention crypto or DeFi specifically, some market participants such as Coinbase expressed their concerns about the ambiguity of its language.

Commissioner’s Disagreement

SEC Commissioner Hester Peirce has fiercely disagreed with this move, claiming that DEXs should not be treated in the same way as centralized exchanges (CEXs). She argued that CEXs are more vulnerable due to their reliance on third parties, while DEXs generally have a lower risk profile since they don’t hold users’ funds in custody.

Crypto Mom Responds

In response to the SEC’s announcement on Friday, Peirce released a statement saying: “My fear is that this supplement will simply serve as another layer of regulation without providing additional clarity or legal certainty.” She further added: “I am concerned about the lack of clarity in how these concepts will be applied going forward.”


It remains unclear whether Peirce’s views will be taken into consideration when finalizing the proposed regulations. In any case, it appears likely that DeFi and CeFi exchanges will eventually fall under similar regulations when it comes to consumer protection laws going forward.