Paradigm, the crypto venture capital firm, has slammed the United States Securities and Exchange Commission and its attempts at redefining the term exchange- which if accepted, would definitely bring in the many decentralized exchanges under itself. On 8th June, the firm went on to issue a 14-page letter to Vanessa Countryman, the SEC Secretary, regarding the proposed redefinition of the term for the regulator in the 1934 Securities Exchange Act.
The SEC has plans of revising the 89-year-old legislation to encompass decentralized exchanges and decentralized finance into the definition of the term. Since the term DEC contains the word exchange, the SEC wants to treat it the same as a stock exchange or securities.
Paradigm Has Written A Strongly Worded Letter To SEC
Paradigm has also argued that the fundamental differences between exchanges and DEXs make treating them as both exchanges under the Act is completely incoherent and invalid. Rodrigo Seira, the legal counsel for the company, also commented that amidst all of the haphazard rulemaking, the SEC had been attempting to bring all of the crypto trading platforms, which includes DEXs, under its remit and then regulate them as securities exchanges. In March 2022, the SEC proposed multiple changes to include systems that offered the use of non-firm trading interest and communication protocols to bring together sellers and buyers of securities.
Paradigm has also argued that DEXs neither work as intermediaries, nor have any association, organization, or group of persons that maintain this exchange. Instead, they have been using market-making algorithms to balance the pools of crypto assets that can be freely accessed by potential sellers or buyers. As it turns out, the SEC has not really pulled any punches this week with multiple lawsuits against two of the largest crypto exchanges in the world, Coinbase and Binance.
