Coinbase has stated that it opposes the idea of placing decentralized crypto exchanges (DEXs) under the SEC’s jurisdiction. What would happen if they are? And what are the risks?
If decentralized crypto exchanges fall under the SEC’s jurisdiction it could have serious consequences for the entire crypto industry. Below we highlight some of the key risks:
First, it could significantly complicate the operation of DEXs and limit innovation in this area. DEXs could be forced to comply with strict registration and reporting guidelines, which would be at odds with their highly decentralized nature. This could lead to the closure of many projects or their departure from the US.
Second, DEX users could face additional identification (KYC) requirements, undermining the principles of anonymity and privacy in the crypto sphere. This could discourage many users from dealing with DEXs.
Third, SEC regulation could slow down the development of DeFi as a whole, as many protocols and applications are built on DEX. This could negatively affect innovation and competitiveness of blockchain technology in the US.
In addition, it could set a precedent for even stricter regulation of other areas of the crypto industry. The SEC could expand its jurisdiction to other decentralized services, which would lead to excessive control over the entire industry.
Thus, transferring DEX to SEC supervision would be a risky move that could seriously impede the development of the crypto industry in the US and prompt many projects to relocate to friendlier jurisdictions.