Paradigm Denounces SEC’s Confusing Approach To Redefining DEXs

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paradigma cryptocurrency-focused investment firm, has sent a 14-page letter to the Secretary of the United States Securities and Exchange Commission (SEC), Vanessa Countryman, criticizing the US body’s attempt to redefine the term “exchange”, which seeks to merge both decentralized exchanges (DEX) and decentralized finance (DeFi) into the definition.

On June 8, Paradigm criticized the SEC’s attempt to alter the definition of an exchange in the context of the digital asset industry. The regulatory agency plans to revise the definition of the term “exchange” in the Stock Exchange Law of 1934 to cover decentralized entities. It appears that the SEC wants to treat DEXs the same as a stock or stock exchange because the term «Decentralized Exchange» contains the word exchange.

PARADIGM OPPOSES THE SEC

Faced with this new attack on the cryptocurrency space, Paradigm sent the letter to the SEC arguing that the fundamental differences between DEXs and exchanges make treating them as «Exchanges» under the Law is both “invalid as inconsistent”.

The cryptocurrency-focused investment firm explained that a DEX, especially those that use automated market maker mechanisms, does not imply that any person or entity plays an intermediary role between buyers and sellers, instead it uses an algorithm to balance pools of digital assets that potential buyers or sellers can freely access.

In addition, a DEX is not managed by any organization, association, or group capable of collective action, but instead relies on code that runs automatically and in many cases cannot be changed or updated. Therefore, combine the DEX in the archaic definition of “exchanges” contemplated by the SEC is “outside its statutory jurisdiction”. paradigm wrote:

“We have a deep understanding of the emerging DeFi ecosystem, as well as the serious adverse effects that would result from the Commission’s proposal to regulate DEXs as if they were traditional securities exchanges.”

PAST MESSES IN THE SEC VS CRYPTO WAR

The San Francisco-based venture capital firm also said that the way the regulatory agency has proposed its new definition of “exchange” also violates the rulemaking procedures of the Administrative Procedure Act (APA). Paradigm also asked the Commission to withdraw its proposal to redefine “exchange” and start considering how to adapt your regulations in the context of DeFi.

It is not the first time that the venture capital firm has criticized the US regulatory agency. Prior to this, Paradigm had alleged that the SEC is abusing its powers by trying to expand its jurisdiction instead of setting parameters on the scope of securities law applicable to digital assets.

noted that the SEC’s current disclosure framework is “inappropriate” for cryptocurrency markets. He had also criticized the agency, stating that SEC Chairman Gary Gensler’s attempt to force-fight digital assets that may not even constitute “values” in a poorly tailored disclosure framework is bad policy.





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