SEC President Gary Gensler wants to regulate DeFi

Gary Gensler, chairman of the Securities and Exchange Commission, focused on decentralized finance (DeFi) projects and argued that they could fall within the remit of regulators. He also said that the term DeFi itself was not necessarily accurate, and called it “a little misnomer.”

“These platforms enable something that can be decentralized in some respects, but highly centralized in others,” Gensler told the Wall Street Journal. This is not the first time that Gensler has called for stricter DeFi regulation.

Gary Gensler and the DeFi sector

The SEC President has previously suggested that the decentralized finance sector could also be included in the sale of unregistered securities.

At the Aspen Security Forum earlier this month, Gensler said thousands of cryptocurrencies or tokens could be considered as unregistered securities. “Decentralized financial platforms can not only violate securities laws – some platforms can also violate commodity and banking laws,” he said.

Gary Gensler did not stop at decentralized finance alone. He has previously joined senators such as Elizabeth Warren and called for more robust consumer protection throughout the crypto sector.

“We are an investor protection agency, and right now this asset class, BTC and the hundreds of other coins that investors trade, is a speculative asset class,” Gensler told CNBC earlier this month. “What we want to do is provide basic protection against fraud and manipulation,” he added.

DeFi-related hacks are on the rise

Gensler’s comments come in the middle of a difficult period for DeFi. Earlier this month, the Poly Network interoperability protocol suffered a $ 600.3 million hack – by far the largest hack the sector has ever seen. The hacker, to whom Poly Network offered him a job, then returned the funds.

Prior to the hack, CipherTrace published a report for forensic blockchain crime stating that DeFi-related hacks in 2021 had increased 270% from the previous year. External attacks drained $ 361 million in tokens from the protocols. Rug Pulls, in which the project itself cheats investors, cost users $ 113 million.

These findings, reinforced by the Poly Network hack, have led some crypto market observers to speculate that this could discourage potential newcomers from the DeFi sector.

“Hack Poly Network has once again shown the risks associated with DeFi and is likely to make people think a second time before using DeFi products,” said Ingo Fiedler, co-founder of Blockchain Research Lab.