In an interview with the Wall Street Journal on August 19, the chairman of the US Securities and Exchange Commission said Gary Gensler warned that decentralized finance (DeFi) platforms are not immune to oversight by the market regulator.

Gensler went further, saying that DeFi projects have features that make them look like the kind of companies regulated by the SEC. The SEC chair made it clear that DeFi projects that reward participants with valuable digital tokens could enter similar incentives subject to SEC regulation.

In short, Gensler hinted that the regulator could start regulating DeFi platforms.

In the past, the SEC targeted centrally operated crypto companies that sold cryptocurrencies or operate exchanges, mutual funds, or ICOs.

Although DeFi platforms are decentralized with no centralized authority, Gensler has claimed that such platforms have organized and transparent developers who control every project.

He referred to people who work in the DeFi industry as “promoters” and “sponsors”.

‚ÄúThere is still a core group of people who not only write the software, like the open source software, but often also have governance and fees. In between there is an incentive structure for these promoters and sponsors. ”

The SEC chairman argued that the term DeFi was not necessarily correct and called it “a bit misleading”. “These platforms enable something that may be decentralized in some aspects but highly centralized in other aspects,” said Gensler.

More investor protection needed

This is not the first time Gary Gensler has called for tighter regulation of DeFi. In the past, the SEC chairman suggested that the decentralized financial landscape could be selling unregistered securities.

On August 3, Gensler spoke at the Aspen Security Forum where he said thousands of crypto assets or tokens act as unregistered securities. The SEC chairman admitted that there is currently no adequate investor protection in cryptocurrencies.

During this time, Gensler publicly stated that he wanted more regulation for the exchange and that he would like to work with Congress on this issue. He expressed a desire that Congress give the SEC additional powers and resources as it extends its oversight of the cryptocurrency. His speech focused on key areas such as tokens classified as securities, stablecoins, DeFi platforms, and crypto-linked financial products such as exchange-traded funds.

Gensler joined senators like Elizabeth Warren in calling for more robust consumer protection in the crypto industry.

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