Oct. 29, 2023
Dear Securities and Exchange Commission, I would like to voice my opinions about the potential negative impact on decentralized finance also known as DeFi. Overly broad SEC regulation of crypto asset platforms risks holding back innovation in DeFi. Here are some potential negative impacts on DeFi to consider. - Many DeFi protocols rely on decentralized exchanges to provide liquidity and price discovery for their governance tokens or related assets. If these DEXs are restricted by SEC rules, it impedes DeFi growth. - DeFi aims to provide open, permissionless financial services. If SEC rules force identity verification, accreditation, and exclusivity, it contradicts the definition of true DeFi. - Much DeFi experimentation is only possible because of the "regulatory arbitrage" afforded by crypto. Overbearing SEC rules remove flexibility for US DeFi developers to innovate. - Many DeFi dApps have governance tokens that could fall under murky security classifications. Overzealous SEC enforcement could restrict US access to and development of novel DeFi protocols. - Layer 2 scaling solutions like state channels and sidechains often use proprietary token designs that could also raise securities concerns. SEC rules could hinder technical progress on DeFi scaling. - US has been a DeFi innovation hub. Burdensome regulations may force projects to relocate overseas to friendlier jurisdictions, hurting US competitiveness. The SEC should tread carefully so that well-intentioned investor protection does not come at the expense of permissionless innovation that is core to the DeFi paradigm. A flexible, nuanced approach is needed to provide clarity without quashing US DeFi advancement. Sincerely, Diane Yearout