The Securities and Exchange Commission (SEC) has suggested an “exchange.” The current definition dates back to a 1934 document. However, a research director at Coin Center, Peter Valkenburg, reportedly told the SEC that its move was “unconstitutional.”
The proposal, which lies amidst an official document dated 18th March, seeks to enlarge the 1934 designation of “exchange.” Reports say that SEC’s proposal includes entities participating in writing or transferring DeFi software as exchanges. Coin Center is a charity organization that concentrates on issues relating to virtual assets.
According to the Center’s research director, SEC’s proposal implies that new entities in the definition would have to register with the Securities and Exchange Commission. However, Peter Valkenburgh says SEC’s move violates another legal provision in the Securities Exchange Act (1934).
SEC’s Move Violates the Securities Exchange Act
Reports say that the latest proposed definition of “exchange” would reportedly include actors that provide non-firm securities’ trading platforms. Mr. Peter explained that the proposal contradicted the First Amendment because it demands code writers to get a license to “speak.”
The research director further asserted that it was inappropriate to broaden the definition of the word “exchange” because it would hinder the speech activities of many application creators and tech developers.
Moreover, Peter Van Valkenburgh highlighted the Supreme Court’s Investment Advisers Act, earlier ordered against such illegal trespasses. He added that the SEC was possibly making its redefinition move due to its recent interactions with data brokers.
Coin Center in another Rights’ Battle
The argument of Coin Center against the SEC isn’t the first time the non-profit organization would challenge American lawmakers. A related event occurred when a top official in the organization assisted in challenging the Infrastructure Bill. Reports say Coin Center was also active in challenging the “America Competes Act.”
Mr. Peter is following the footsteps of the said official by challenging the SEC’s redefinition suggestion. According to Valkenburgh, the redefinition and the harsh punishments for defaulters would lead to self-censorship among many American innovators.
Peter van Valkenburgh ended his argument by saying the proposed benchmark is due for a pre-enforcement contest based on the First Amendment. The US First Amendment stipulates no legislation against the free exercise of religion, speech, the press, or assembly. The First Amendment also grants the protected right to contest Government actions.
SEC’s proposal is a step in the direction of decentralized exchange firms. Analysts say the move is part of the regulatory body’s unsaid motives for regulating the DeFi ecosystem.
A crypto attorney, Jake Chervisnky, said the SEC was planting widespread uncertainties about the identity of DeFi industry players. Jake says the government is trying to get a share in the massive expansion of decentralized exchanges. However, the attorney says the government is also confusing the sector it seeks to regulate.
In March 2022, the SEC sought to redefine “dealers” under its regulation to include players whose activities can provide liquidity to other persons or are involved in passive trading strategies.