SEC: “DeFi is more centralized than you think and must be regulated.”
SEC: “DeFi is more centralized than you think and must be regulated.”
Blockchain

SEC: “DeFi is more centralized than you think and must be regulated.”

By Amelia Tomasicchio - 20 Aug 2021

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At the head of the U.S. Security Exchange Commission (SEC), Gary Gensler said that many of the decentralized finance platforms (DeFi) are actually highly centralized. For this reason, they must be regulated and registered.

In fact, in an interview with the Wall Street Journal, Gensler explained that DeFi projects are not immune to regulation because 

“These platforms facilitate something that might be decentralized in some aspects but highly centralized in other aspects.”

SEC wants to regulate DeFi

The problem, according to Gensler, is that developers of these platforms often stop at more than just writing code but have to deal with governance and fees that oversee advertising incentives.

“There’s still a core group of folks that are not only writing the software, like the open-source software, but they often have governance and fees. There’s some incentive structure for those promoters and sponsors in the middle of this.”

On this topic, Gensler was also interviewed by Fox Business today, explaining that regulation of DeFi projects is necessary.

“These so-called decentralized finance platforms actually have a lot of centralization. There’s a group of entrepreneurs that are running these platforms. They should come in and to that extent work with us and get registered.”

Is DeFi really decentralized?

According to ConsenSys, the blockchain software company founded by Joseph Lubin, some projects are genuinely decentralized, such as Maker (MKR) or the decentralized exchange Uniswap, but other projects that call themselves DeFi often have a high centralized part.

“Some have large control over their direction, others are governed by venture capital investors, and others have broader communities that vote in changes like an open-source project.” 

That was stated some time ago by Lex Sokolin, CMO and Global Fintech Co-Head of Consensys to CryptoNews.com.

It is not for nothing that there is the website Defiscore.io that provides a score in terms of centralization and risks of a project. Who knows, maybe this tool will become the basis for the SEC’s regulatory study.

Amelia Tomasicchio

As expert in digital marketing, Amelia began working in the fintech sector in 2014 after writing her thesis on Bitcoin technology. Previously author for Cointelegraph and CMO at Eidoo. She is now the co-founder and editor-in-chief of The Cryptonomist. She is also a marketing teacher at Digital Coach in Milan and Business Developer at Huobi for the Italian market.

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