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According to SEC chairman Gary Gensler, many DeFi projects are “very” centralised in some ways since they are built by a “core group of persons” who are compelled to promote their platforms.
The head of the United States Securities and Exchange Commission, Gary Gensler, noted that DeFi is very centralised in some respects and advised projects working in the sector to register with the SEC.
Speaking to The Wall Street Journal on Aug. 19, Gensler suggested that the decentralized notions implied by the term DeFi were “a bit of a misnomer,”:
“These platforms facilitate something that might be decentralized in some aspects but highly centralized in other aspects.”
While DeFi projects are intended to be autonomous platforms that function without centralised authority, Gensler claims that many are built and controlled by a centralised staff that is financially motivated to promote their platforms.
“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,” he said, “there’s some incentive structure for those promoters and sponsors in the middle of this.”
Gensler expanded on his comments in an Aug. 20 interview with Fox Business and suggested that such DeFi projects are centralized enough to fall under the scope of regulation. He urged DeFi projects to register with the SEC:
“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.”
Earlier this month, SEC commissioner Hester Peirce – colloquially known as “Crypto Mom” — warned of “shadow-centralization” within the DeFi sector, echoing similar thoughts from a different aspect.
According to Peirce, “If regulators can identify a centralised portion or set of individuals that they can grab hold of, they will grab hold of them,” as she recommended prudence in how programmes are structured from the ground up.
“If you want to be decentralised, you truly need to be decentralised, and that will then put you in a separate category from the standpoint of regulators because that’s just not something we’ve dealt with before,” she explained.
On August 3, it was reported that Gensler had highlighted various crypto policy changes that are being investigated by the SEC, including DeFi, lending platforms, token offerings, stablecoins, exchange-traded funds, and custody.