The Securities and Exchange Commission (SEC) may set its sights on stablecoins and decentralized finance (DeFi).
Such a move is “likely” after the regulator’s recent enforcement actions targeting players in the cryptocurrency industry, investment bank Berenberg said in a report published Tuesday (June 21) and emailed to PYMNTS.
Having examined public statements and lawsuits filed in recent months by the SEC and other regulators, “we have concluded that the SEC may now focus its actions on bringing stablecoins, including both USD Coin (USDC) and Tether (USDT), and DeFi protocols into regulatory compliance,” Berenberg said in the report.
The investment bank said in the report that SEC Chair Gary Gensler and some other commissioners voted in April to define an exchange in a way that includes DeFi protocols and that the bank believes that targeting stablecoins would be a way to reduce the viability of DeFi protocols serving as alternatives to regulated lenders and exchanges.
“We believe that if Mr. Gensler and his team at the SEC are seeking to reduce the potential for unregulated DeFi protocols to serve as viable alternatives to regulated lenders and exchanges, they could do so without having to target them directly,” Berenberg said in the report. “They could make significant headway in that effort by targeting the stablecoins that play a critical role in the functioning of decentralized finance.”
The SEC’s crackdown on the cryptocurrency sector includes two lawsuits filed earlier this month.
On June 5, the agency charged Binance — the world’s largest cryptocurrency exchange — and its founder with artificially inflating its trading volumes, rerouting customer funds, failing to keep U.S. customers off its platform and misleading investors about market surveillance controls.
One day later, the SEC sued Coinbase for allegedly violating securities laws.
Both Binance and Coinbase refute the SEC’s claims and argue that the agency is attempting to regulate the crypto sector via enforcement instead of rules for their industry.
With these lawsuits, the era of financial freewheeling for digital asset players looks to be coming to an end, Amias Gerety, partner at QED Investors, told PYMNTS’ Karen Webster in an interview posted June 12.
“The crypto community believed and had a real conviction what they were doing was so new that existing laws could not possibly apply,” Gerety said at the time. “And in the history of financial services, there’s basically never been a group of people with any commercial success who had that conviction.”
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