Decentralized Exchanges Will Not Be Able To Avoid The SEC Supervision Says Robert Cohen


Most of the cryptocurrency space is currently based in centralized exchanges. If a user wants to purchase or sell cryptocurrencies, it creates an account in a centralized exchange and starts operating in that platform. However, there are decentralized virtual currency exchanges that allow users to exchange their virtual currencies in a decentralized way.

Nevertheless, decentralized exchanges are also going to be controlled by regulatory agencies around the world. This time, the U.S. Securities and Exchange Commission (SEC) has filed charges against an Ethereum-based decentralized exchange. According to the regulatory watchdog, decentralized platforms must be compliant with the local regulatory framework.

Back on November 8, the SEC brought charges the creator of the decentralized exchange EtherDelta due to the fact that the platform was not authorized or exempted by the SEC.

During a conversation with Forbes, Robert Cohen, Chief of the SEC Division of Enforcement Cyber Unit, the creator of a decentralized exchange is still responsible and liable for the platform. For him, the focus is on the function rather than on the service’s label or the technology itself.

On the matter, he commented:

“The focus is on the function, and what the platform is doing. Whether it’s decentralized or not, whether it’s on a smart contract or not, what matters is it’s an exchange.”

Decentralized exchanges, as mentioned before, work in a different way compared to centralized platforms. In these decentralized networks, sellers and buyers are directly connected one with another in order to sell or purchase virtual currencies. And all the mechanism behind these exchanges runs using a self-executing code.

The cyber unit at the SEC is in charge of regulating this place after the DAO scandal that shocked the cryptocurrency market a few years ago. It is important to mention that the report that the SEC issued after the DAO situation confirms that DAO tokens are considered as securities. This is why tokens and exchanges must be regulated by the SEC.

The legal action that the SEC took against EtherDelta might set a precedent in the industry, according to some experts in the matter. Nevertheless, if there is an increasing anonymity in the space, the work for the SEC could become even more complicated in this decentralized space.

Coburn agreed to pay the financial watchdog $388,000 dollars in interest and penalties. As of Friday, November 9th, the platform continues to perform trades normally.

Binance, one of the largest virtual currency exchanges by trading volume, has plans to launch a new decentralized exchange based on its virtual currency known as Binance Coin (BNB).

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