DeFi projects could come under SEC's oversight, says chairman Gensler

Gary Gensler, chairman of the U.S. Securities and Exchange Commission (SEC), has said that the agency could regulate decentralized finance (DeFi) projects.

Specifically, DeFi projects that reward participants with valuable tokens or similar incentives could be regulated, no matter how "decentralized" they say they are, Gensler said in an interview with the Wall Street Journal on Wednesday.

"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," said Gensler. "There's some incentive structure for those promoters and sponsors in the middle of this."

According to Gensler, the term DeFi is "a bit of a misnomer" because these platforms "facilitate something that might be decentralized in some aspects but highly centralized in other aspects."

Some DeFi platforms can be compared with peer-to-peer lending platforms, which are regulated by the SEC, said Gensler.

This is not the first time Gensler has called for DeFi regulation. Earlier this month, the chairman said: "In my view, the legislative priority should center on crypto trading, lending, and DeFi platforms. Regulators would benefit from additional plenary authority to write rules for and attach guardrails to crypto trading and lending."

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Yogita is a senior reporter at The Block and covers all things crypto. Before joining The Block, Yogita worked for CoinDesk and The Economic Times. She can be reached at [email protected] Follow her on Twitter @Yogita_Khatri5.