Earlier this week, Hester Peirce, whose renomination as Commissioner at the U.S. Securities and Exchange Commission (SEC) was confirmed by the U.S. Senate on August 6, spoke about regulatory challenges facing decentralized finance (DeFi).
Here are a few highlights of these remarks:
“I think when you start to put security-like, sort of benefit-like, equity-like characteristics, again that’s gonna be something you have to think about. I say that with a little hesitation only because I think it’s really interesting what’s happening in the DeFi space…
“There’s some real potential for some pretty major and revolutionary change coming out of the DeFi space. This idea that you can have the users of something be the ones who also govern it in a very direct way. And so that will challenge the regulatory structure in a number of ways.
“Some of those are on the securities side but I think also on the corporate governance side, much of which is within state law purview. We’re going to have to ask a lot of really difficult questions about what that means for how we regulate things…
“I think when you have the people who are actually using something deciding its future, then the changes that happen are decided by the community together. And that’s a sort of regulatory function. It’s not a government regulatory function, but it’s a regulatory function by the people who are actually using it. So someone can launch one of these projects and say, ‘I have this great vision for what’s gonna happen with this project.’
“But if you really launch it and put it in the hands of your community, it could end up doing and being something very different than what you initially imagined it to be. It could ultimately be very different. So you have to have a little bit of willingness to be hands-off and see what happens. And that’s probably a little bit scary for some developers to do that, but I think it’s kind of an interesting thing to watch.”