The DeFi craze remains high. What does the US SEC think about it?

According to BlockBeats, as the DeFi market continues to be hot, some US SEC commissioners were interviewed and expressed their views on decentralized finance (DeFi).

The current DeFi craze has not attracted much attention or sensation at the U.S. Congressional level. However, the U.S. SEC has already paid attention to DeFi. SEC Commissioner Hester Peirce said in an interview that DeFi regulation will not be a top priority this week, but in 2020, she and other SEC members are paying close attention to the booming DeFi and the imminent regulatory challenges it may bring.

Compared to other commissioners, Peirce has long had a unique interest in the crypto ecosystem and the broader impact of digital assets. In her speeches and regulatory proposals, she has consistently expressed a desire to protect innovation without letting it get out of control and hurt investors.

DeFi, she says, has taken that balancing act to new heights. She has learned how many digital asset projects work, but she admits that there is still a long way to go in her DeFi education. “I think some of the activity in DeFi will help me try to define more of what decentralization means,” Peirce said. To her, these projects seem to be trying to accomplish something different than many of the projects that emerged during the 2017 ICO boom. Specifically, the DeFi revolution seems to have a broader agenda than ICOs.

“With ICOs, people are thinking, ‘Can I build a network?’ For example, with Telegram, the goal was to build a network and build a currency that would work effectively within that network. And I think what DeFi is trying to do is not so easily categorized,” Pierce said.

Regulators have been watching the DeFi space and are aware of the recent growth, but in a year with so many unprecedented events, the popularity of new DeFi projects is not the most eye-catching. "This (the rise of DeFi) is a big thing, but it's still relative," she said. "So if it becomes bigger and more influential, then I think you'll see more regulatory attention, but that's not to say there isn't any regulation paying attention to DeFi now."

In July, the total value locked in DeFi exceeded $2 billion and the market capitalization exceeded $7 billion, but this is still dwarfed by traditional markets.

Pierce said DeFi teams and their advocates have yet to seek formal guidance from the agency. She has received more questions about the regulatory role of decentralized exchanges (DEXs). Aside from the occasional lawyer type who expresses interest in DeFi-specific regulation on Twitter, not many industry insiders have engaged with the SEC.

However, she believes these conversations with regulators will eventually happen, and she welcomes the process because DeFi could challenge the U.S.'s view on financial regulation.

Digital assets already present unique challenges for regulators, and DeFi is another offshoot with its own nuances. This presents a unique challenge: who should be held accountable? When the goal is to build networks that rely on smart contracts rather than people to manage them, so that if something goes wrong, these networks can attribute the fault to the contract rather than the manager.

“It’s going to challenge our approach to regulation. It makes us question what do we think the role of regulators is in DeFi?” Pierce said.

It is unclear whether existing regulatory proposals can be addressed. For example, Peirce proposed a regulatory safe harbor for token projects in February. The proposal is currently undergoing a public comment period. While the policy would give blockchain networks some time to become truly decentralized, it is unclear whether the policy can be seamlessly applied to DeFi governance tokens.