The US securities regulator SEC gave the good news for DeFi protocols at the time of writing. During the Biden era, SEC registration was required for all DeFi protocols and even KYC was requested for customers transacting using websites. The SEC softened this significantly and gave the good news today.
DeFi and SEC
SEC’s With the latest announcement shared by the Trade and Markets Department DeFi He explained that certain crypto trading interfaces, including protocols’ websites, wallet extensions and mobile applications, can operate without broker-dealer registration.
“Specifically, to the Staff’s understanding, Covered User Interfaces prepare code that enables users to interact with blockchain protocols (or blockchain-based smart contracts) by translating user-specified cryptoasset security transaction parameters (e.g., buy/sell, volume, cryptoasset security, and price or price range) into blockchain-readable commands to be signed and transmitted through the user’s own custodial wallet.”
Comprehensive User Interfaces can also provide users with market data such as potential execution paths, asset prices, and estimated transaction costs (e.g. “gas” fees) for cryptoasset securities transactions. Comprehensive UI Providers typically charge users a flat percentage fee per transaction. Covered User Interfaces may provide educational materials to users to help them create and set their desired cryptoasset security trading parameters on a transaction-by-transaction basis or by default. “-SEC
Relating to DeFi SEC registration will not be mandatory if their protocols include no order routing, no investment consultancy, no storage of user assets, and only fixed, neutral fee structures. The guidance applies to self-custody wallet interfaces, and the conditions will remain the same for 5 years unless the SEC disables this guidance with another decision.
