The Securities and Exchange Commission introduces a Trojan horse regulation in conjunction with price retracement

Bitcoin and other cryptocurrencies end a lackluster week on a high. Today the price of Bitcoin increased by 3.2%. The price of Ethereum jumped by 8%.

NBB jumped 3.8%, Cardano 2.8%, XRP 2.7%, and Solana 8.5%. Meanwhile, SEC regulators are conspiring to ambush cryptocurrency markets through the Trojan Horse legislation.

Last week, the Securities and Exchange Commission filed a seemingly unrelated 654-page plan aimed at regulating “treasury markets platforms.” However, pro-crypto Commissioner Hester Peirce warns that it is comprehensive crypto regulation in disguise. While the proposal does not mention crypto, its new rules would allow regulators to investigate crypto platforms and even decentralized finance (DeFi) protocols. “The proposal includes highly expansive language, which, coupled with the President’s clear interest in regulating all things crypto, suggests it could be used to regulate crypto platforms,” Pierce wrote in an email, as Bloomberg reported. “The proposal could reach more types of trading mechanisms, including potentially DeFi protocols,” she added.

[Ed Note: Investing in crypto is highly speculative and the market is largely unregulated. Anyone considering this should be prepared to lose their entire investment.] Zooming out Technically, the SEC proposes to “expand Regulation ATS to alternative trading systems (ATS) that trade government securities, NMS shares, and other securities,” “expand the scope of Regulation SCI to include ATSs that trade government securities,” and “amend the SEC rule regarding the definition of “exchange.” According to the SEC Chairman Gary Gensler, the amendments are intended to fill a “regulatory gap” caused by trading platforms that are not registered as exchanges or brokerages with the Securities and Exchange Commission.

He also noted that the proposed rules would expand existing regulations related to platforms that trade Treasuries and other government securities. This proposal would require these platforms to register and be regulated, which would “enhance flexibility and increase access to the treasury market.” However, Pierce believes that this expansion of the definition of exchange could also serve as a backdoor way to rein in cryptocurrencies.

“The proposed expanded definition of exchanges covers a lot of potential platforms that you didn't necessarily think would be covered and that's in the traditional security space, as well as in the crypto space,” she said during an interview with Yahoo Finance. This is in line with the SEC Chairman's stance to tighten oversight of DeFi. In an interview with The Wall Street Journal last year, Gensler said DeFi platforms are not exempt from market regulations: “Although they are decentralized, with no central entity in charge, DeFi projects that reward participants with incentives or digital tokens could enter SEC-regulated territory.”

Looking Ahead There will be a 30-day window counting from January 26 for blockchain industry insiders, trading platforms, and other stakeholders to comment on the SEC’s proposed new plan. Pearce believes this is an unusually short comment period for such an important regulatory proposal. Combined with the executive order that Biden intends to issue, this may reflect regulators' itching to tighten their grip on the exploding decentralized finance market.

After the comment period, the SEC will hold another vote to reach a final decision. If passed, the amendments could give the SEC new powers to regulate crypto and DeFi platforms. Source- The SEC Introduces A ‘Trojan Horse’ Crypto Regulation As The Price Of Bitcoin, Ethereum, BNB, Solana, Cardano, XRP Rebounds (forbes.com)