SEC Commissioner: DeFi must address transparency, pseudonymity

Caroline Crenshaw, Commissioner of DeFi, wants DeFi projects and the SEC to work together to ensure compliance with existing regulations.
Crenshaw, the SEC Commissioner, has highlighted the benefits of Decentralized Finance and warned of the dangers of failing a protective regulatory framework. She argued that when market participants operate pseudonymously it is difficult to track and mitigate manipulation via the use of bots or collusive trading. She said that investors tend to be most vulnerable to losses as a result of market manipulation since normal signals, like trading volumes and momentum, become unreliable.Furthermore, she believes that DeFi projects should be in open discussion with the SEC to find solutions to the dilemma of resolving how pseudonymity can comply with existing rules. The DeFi space has always emphasized the fact that participants can remain anonymous as a benefit, not a burden. Crenshaw doesn’t believe that investors place privacy above making money. Crenshaw spoke at the SEC Speaks conference on October 12. Crenshaw said that existing regulatory frameworks such as the gatekeeping functions in other markets are sufficient to protect investors in the digital space. Related: The regulators are coming for stablecoins but what should they start from? While Crenshaw’s current criticisms about DeFi don’t quite echo the bellicose sentiments of Senator Elizabeth Warren or former Commodity Futures Trading Commission Dan Berkovitz, they do not compare to the approach of SEC Commissioner Hester Petty, who supports a safe harbour law that would allow network developers a three year grace period to create a decentralized network.

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